Description
Using the textbook, Principles of Microeconomics, as your only source (do not quote the textbook they will not count towards your answers, put everything in your own words) answer each of the following questions making sure to number each answer:
- Explain how demand curves are constructed using the indifference curve and budget constraint.
- Explain how higher wages affect the budget constraint and thus the demand curve. Provide a personal example.
- Explain how price changes affect the budget constraint and thus the demand curve. Provide a personal example.
- Explain the impact asymmetric information has on economic transactions. Provide a personal example.
- Explain how the impact of asymmetric information can be reduced in the market. Provide a personal example.
- Explain the Condorcet Paradox and Arrow's Impossibility Theorem. Provide examples.
- Explain how people would not be rational in behavior economics. Provide a personal example.
Cite the textbook as your only source. Failure to properly cite and reference the presentation is considered plagiarism, even if you use your own words (paraphrase). Remember, you should not quote the textbook or any other source. Quotations will not count towards your answers. See the CWE page of the Library on how to prevent plagiarism.
Mankiw, N.Gregory. (2015). Principles of Microeconomics, 7th Edition, Stamford, CT. Cengage Learning.
Explanation & Answer
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Theory of consumer choice
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According to the microeconomics text, demand is the numbers of goods and services
buyers are willing and able to buy at a particular price over a given period of time with the
hypothesis that the consumer/buyers tastes and preferences remain constant as well as the
income. A demand curve shows the relationship between n prices and the quantity derived from
the consumption rate (Mankiw, Gregory. 2015).A demand curve can be derived from the
indifference curve by simply changing the subjects and placing them n the rightful axis. For
instance in this case, whereby on the horizontal axis which is also the X-axis of the indifference
curve should be the quantity demanded of a given product, on the demand curve it will still
remain to be on the same axis only that it will be quantity demanded as it may not be necessary
to quote the product like it is in the indifference curve. On the vertical axis which is the Y-axis,
we would have money on the indifference curve is what we have as the price per unit in the
demand curve. Then we plot off, the prices per unit against the quantity demanded on the Xaxis. After the plotti...
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