THEORIES OF TRADE CYCLE

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THEORIES OF TRADE CYCLE forward from time tu time. We shall say here a word about some well-known  conchs, Climatic Theory It is said that there are cycles of climate. For some years the climate is favourable and then comes an unfavourable turn. Changes in climate bring about changes in agricultural production. Thus, there are bumper crops for some years followed by […]

PROBLEMS AND APPLICATIONS

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PROBLEMS AND APPLICATIONS 1. Brad spends his income on two goods: hair gel and toothpaste. Both goods are normal goods Suppose that the price of hair gel falls. a. Show the effect of this price decrease on Brad’s budget constraint. b. Show the effect of the price decrease on Brad’s optimal consumption bundle assuming that the income […]

QUESTIONS FOR REVIEW

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QUESTIONS FOR REVIEW 1. A consumer has income of $3,000. Wine costs $3 a glass, and cheese costs $6 a pound. Draw the consumer’s budget constraint What is the slope of this budget constraint? 2. Draw a consumer’s indifference curves for wine and cheese. Describe and explain four properties of these indifference curves. 3. Pick a point […]

CONCLUSION DO PEOPLE REALLY THINK THIS WAY

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CONCLUSION DO PEOPLE REALLY THINK THIS WAY The theory of consumer choice describes how people make decisions. As. we have seen, it has broad applicability. It can explain how a person chooses between Pepsi and pizza, work and leisure, consumption and saving, and on and on At this point, however, you might be tempted to treat the theory […]

HOW DO INTEREST RATES AFFECT HOUSEHOLD SAVING

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HOW DO INTEREST RATES AFFECT HOUSEHOLD SAVING An important decision that every person faces is how much income to consume today and how much to save for the future. We can me the theory of consumer choice to analyze how people make this decision and how the amount they save depends on the interest rate their savings […]

INCOME EFFECTS ON LABOR SUPPLY HISTORICAL TRENDS, LOTTERY WINNERS AND THE CARNEGIE CONJECTURE.

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INCOME EFFECTS ON LABOR SUPPLY HISTORICAL TRENDS, LOTTERY WINNERS AND THE CARNEGIE CONJECTURE. The idea of a backward-sloping labor-supply curve might at first seem like a mere theoretical curiosity, but in fact, ‘it is not. Evidence’indicates that the labor-supply curve, considered over long periods of time, does in fact slope backward. A hundred years ago,  many people worked […]

How Do WAGES AFFECT LABOR SUPPLY

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How Do WAGES AFFECT LABOR SUPPLY between two goods. We can use the same theory to analyze how a person decides to allocate time between work and leisure Consider the decision facing Sally, a freelance software designer. Sally is awake for 100 hours week She spends some of this time enjoying leisure-riding her bike, watching television, studying economics, […]

DO ALL DEMAND CURVE SLOPE DOWNWARD

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DO ALL DEMAND CURVE SLOPE DOWNWARD Normally, when the price of a good rises, people buy less of it. This usual behavior, called the law of demand is reflected in the downward slope of the demand curve As a matter of economic theory, however, demand curves can sometimes slope upward. In other words consumers can sometimes violate the […]

THREE APPLICATIONS

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THREE APPLICATIONS Now that we have developed the basic theory of consumer choice, let’s use it to shed light on three questions about how the economy works. These three questions might at first seem unrelated. But because each question involves household decision making, we can address it with the model of consumer behavior we have just developed. Get […]