Thursday

 



Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 7 Topics for Further Study
Chapter 21 of 36 The Theory of Consumer Choice
Section 14 of 26
…
Figure 9 – A Change In Price
When the price of Pepsi falls, the consumer's budget constraint shifts outward
and changes slope.
The consumer moves from the initial optimum to the new optimum.
This changes his/her purchases of both pizza and Pepsi.
In this case:
· the quantity of Pepsi consumed rises
· the quantity of pizza consumed falls
…
Here we look at how a change in the price of one of two goods alters consumer choice between the two.
In Figure 9 the price of Pepsi falls from $2 to $1 per pint.
The new lower price expands the consumer's set of buying opportunities.
A fall in the price of any good shifts the budget constraint outward.
If the consumer wants to spend his entire $1,000 income on pizza the new lower price of Pepsi is irrelevant and only consumption of pizza point A stays the same at 100 pizzas.
If the consumer wants to spend his entire $1,000 income on Pepsi he can now buy 1,000 rather than only 500 pints, moving from point B to point D.
…
The new lower price of Pepsi causes the budget constraint to shift outward
and to change its slope.
The slope of the budget constraint shows the pizza and Pepsi relative price.
Because the price of Pepsi has fallen to $1 from $2, and the price of pizza has remained $10
· the consumer can now trade 1 pizza for 10 pints of Pepsi
· rather than previous 1 pizza for 5 pints of Pepsi
· resulting in the new budget constraint having a steeper slope
…
How such a change in the budget constraint alters the consumption of both goods depends on the consumer's preferences.
Because of the consumer’s indifference curves here he buys more Pepsi and less pizza with the extra money to spend he now has because of the price fall of Pepsi.
… …
a change in price
kakaku henkō
価格変更

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