Income effect

Another important item that can change is the income of the consumer. As long as the prices remain constant, changing the income will create a parallel shift of the budget constraint. Increasing the income will shift the budget constraint right since more of both can be bought, and decreasing income will shift it left.

4-7. Utility:

Definition of Utility :An economic term referring to the total satisfaction received from consuming a good or service

It measures the happiness or satisfaction gained consuming commodities (goods and services).

4-8.Marginal utility: The theory of marginal utility was independently developed around1870 by William Stanley Jevons in England, Carl Mengerin Austria and Leon Walrasin Switzerland.

4-8.1. Definition of marginal utility: Amount of benefit derived from consuming one  additional unit of a product or service.

4-8.2. Total utility & marginal utility table:

4-8.3. Total utility & marginal utility curve:

4-8.4. How can we get marginal utility?

Example:

From the table below find the marginal utility?

Questions:

1.    Draw the curve of Price effects?

2.    Draw the curve of Income effects?

3.   Give a definition of Utility?

4.   Draw the Total utility & marginal utility curve?

5.    From the table below find the marginal utility?

6.   Translate the following paragraph:-

Elasticity

Ahmed who has super market ask his colleague Mustafa who is studying economics about the relationship between the demand of  hair spray and its price, because he note that a slight change in price of hair spray leaded  to a sharp change in the quantity demanded of it.

 Mustafa claim that relation to elasticity, which means good or service is considered to be highly elastic if a slight change in price leads to a sharp change in the quantity demanded or supplied. Usually these kinds of products are readily available in the market and a person may not necessarily need them in his or her daily life.