User:Rekham/Temp/Price Effect (Autosaved).doc
| Chapter Outline
|| XXX.1 PRICE EFFECT
XXX.1.2 NUMERICAL EXAMPLE ON PRICE EFFECT
XXX.2 TYPES OF PRICE EFFECT
XXX.3 DERIVATION OF DEMAND CURVE
XXX.4 CASE STUDY
XXX.6 KEY TERMS
XXX.8 QUESTIONS FOR DISCUSSION
XXX.9 SUPPLIMENTARY READING
XXX.10 INTERNET SITS
XXX.11 PRICE EFFECT MATHEMATICALLY (APPENDIX)
| Optimal Consumption
MRSXY = -
|In the previous section we have seen how optimal consumption combination, the one that maximizes the utility of spendable income, is determined at the point where budget constraint is tangent to an indifference curve. In other words, marginal rate of substitution equals the price ratio. As illustrated in Figure XXX.|
| In this section we are going to change the price of good X (PX) and observe how consumption changes. Figure XXX.1 starts with the optimal consumption attained at point e1 as in Figure XXX.
| Figure XXX.1
|| Units of Good Y
X1 X L1 X2 L L2
Units of Good X
| When the price of good X increases, the budget constraint then becomes steeper, as the lower end point moves leftward. This is depicted by budget constraint PL1. The optimal consumption is located at point e1 at which the consumer buys OX1 units of good X. Consumer’s total utility decreases as the equilibrium point is located on a lower indifference curve.
|XXX.1.2 NEUMERICAL EXAMPLE|| PX = Rs.10 PY = Rs 5
Equilibrium combination is 16X + 8Y
Consumer spending (16*10 + 5*8 = 160 + 40 =200)
Equilibrium combination is 7X + 12Y
Impact of fall in price of X on its purchase.
|XXX.3|| DERIVATION OF THE CONSUMER’S DEMAND CURVE
| Figure XXX.2
|| Price of Good X
X1 X X2 Units of Good X
Global Hunger Index 2011 - The Challenge of Hunger: Taming Price Spikes and Excessive Food Price Volatility
Fact and Findings: Asia
South Asia has the highest regional 2011 Global Hunger Index (GHI) score—22.6. The 2011 GHI score fell by 25 percent in South Asia compared with its 1990 score, and the 2011 GHI score in Southeast Asia decreased by 44 percent.
The South Asia region reduced its GHI score by more than 6 points between 1990 and 1996—mainly due to a large decline in underweight in children under five, but the fast progress was not maintained. South
Asia has lowered its GHI score by only one point since 2001 despite strong economic growth. Social inequality and the low nutritional, educational, and social status of women, which is a major cause of child under nutrition in the region, have impeded improvements in the GHI score.
Bangladesh and Vietnam saw large gains in improving their GHI score between the 1990 GHI and the 2011 GHI. Vietnam reduced its score by 56 percent, and Bangladesh reduced its score by 36 percent.
In Bangladesh—a country where 25 percent of the population is ultra-poor (living on less than USD $0.50 a day)—only about 7 percent of the population has access to social protection or safety net programs.
The GHI score for North Korea increased by 18 percent since 1990. A weak economy, high military spending, weather-related crop failures, and systematic problems in the agricultural sector have hampered progress.
Cambodia is the only country to improve from an “extremely larming” to “serious” level of hunger since 1990.
Bangladesh, India, and Timor-Leste have the highest prevalence—more than 40 percent—of underweight in children under five.
India ranks below China, Pakistan in Global Hunger Index 2011
ET Bureau Oct 12, 2011, 04.13am IST
NEW DELHI: India ranked way below its South Asian neighbours Pakistan, Sri Lanka and China in the global hunger index 2011 released by the International Food Policy and Research Institute. South Asia fared worse than Sub-Saharan Africa netting a score of 22.6 on the global hunger index, or GHI, the report said.
While, India stood 67th amongst 81 countries, Pakistan ranked 59, China ranked fourth, Vietnam ranked 25 and Sri Lanka ranked 36 in the GHI. The report blamed high volatility in food prices for rising hunger levels worldwide.
"The poorest and most vulnerable people bear the heaviest burden when food prices spike or swing unpredictably," said Klaus von Grebmer, lead author of the report and IFPRI Communications Director in the press release.
| Units of Good Y
X L Units of Good X
| Exercise XXX 1.2
|| Complete the following diagram to depict zero price effect
| Units of Good Y
X L Units of Good X
| Exercise XXX 1.3
|| Part (a) of the graph depicts consumer’s quantity demanded at optimal consumption combinations as stated in the neumerical example. Derive the demand curve in the lower part (b) of the graph.
Units of Good Y
Price of Good X
|XXX.10|| INTERNET SITS
Microeconomics, Macroeconomics and Economic Policy
| Essays in Honour of Malcolm Sawyer
Palgrave Macmillan, September 2011ISBN: 978-0-230-29019-8, ISBN10: 0-230-29019-1, 6 1/8 x 9 1/4 inches, 280 pages, 8 b/w tables, 15 figures,
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