Page 49 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes
4.23 Income and Substitution Effects in Case of Giffen Goods

4.24 Possible Combinations of Income and Substitution Effects
4.25 The Slutsky’s Approach

4.26 How Slutsky’s Approach Differs from Hicks’ Approach
4.27 Price Consumption Curve

4.28 Explanation

4.29 Slope of PCC Curve
4.30 Derivation of Demand Curve Through Indifference Curve Analysis or Through Price
Consumption Curve
4.31 Difference between Demand Curve and Price Consumption Curve

4.32 Income Consumption Curve
4.33 Slope of the Curve

4.34 Engel’s Curve
4.35 Criticism of Demand Theory

4.36 Alleged Exceptions to the Law of Demand

4.37 Demand Theory is Unrealistic: Consumer Behaviour Contradictory to Demand Theory
4.38 Summary

4.39 Keywords

4.40 Review Questions
4.41 Further Readings

Objectives

After studying this unit, students will able to:
• Know the Derivation of Demand.
• Understand the Marginal Substitution Effect.

• Study the Price Effect.
• Know the Demand Theory.

Introduction

Utility analysis is based on the recognition that the cardinal measurement of utility of product is
possible which means utility can be described by cardinal numbers 1, 2, 3, 4, 5….. etc. But this is not

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