chapter 9: buying and selling

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Last updated 9:37 PM on 3/12/25
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14 Terms

1
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Gross demand
Amount consumer consumed.
2
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endowment

A consumer's wealth or assets that can influence their purchasing decisions.

3
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Net demand
Gross demand minus endowment.
4
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Positive net demand
Signifies that the individual is a buyer of a good.
5
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Negative net demand
Signifies that the individual is a seller of a good.
6
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Endowment bundle
Is always on the budget constraint.
7
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P1w1 + P2w2 > P1w1’ + P2w2’
Indicates that the original endowment is worth more than the new endowment, making the consumer worse off.
8
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Normal good 1 with new endowment worth less
Demand for good 1 will decrease.
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True or False: with an endowment, changing prices will change income

True

10
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Effect of a decrease in P1 on the budget line
The budget line becomes flatter and the endowment bundle is still affordable.
11
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Effect of an increase in P1 on the budget line
The budget line becomes steeper and the endowment bundle is still affordable.
12
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Impact of price increase on net buyers
Net buyers will be worse off than before.
13
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Impact of price decrease on buyers (revealed preference)
They must remain a buyer.
14
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Impact of price increase on net sellers (revealed preference)
They must remain a seller.