Determinants of quantity demanded |
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objective: constrained utility max |
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| 1. | Income Effects |
| Normal case - direct relationship between income and quantity demanded | |
| Inferior case - inverse relationship (ex: Old Milwaukee Beer) | |
| 2. | Income expectations |
| direct relationship ("recession is a self-fulfilling prophecy") | |
| 3. | Price Effects |
| Normal case - inverse relationship between price and quantity demanded | |
| Snob case - direct relationship (ex: designer jeans & anything Yuppie) | |
| 4. | Price Expectations effects |
| direct relationship (ex: "bull" and "bear" markets) | |
| 5. | Cross-Price Effects |
| Complements- inverse relationship (ex: gas prices and gas hog vehicles) | |
| Substitutes - direct relationship (ex: McDonald's v. Burger King) | |
"CETERIS PARIBUS"
Qd = Q [ Y, YE, P, PE, PC, PS ]
Changes in Demand
Demand Substitution
Elasticity & Tuition
Maximum Revenue