chapter 9: buying and selling

gross demand - amount consumer consumed

net demand - gross demand - endowment

positive net demand - signifies that individual is a buyer of a good

negative net demand - signifies that individual is a seller of a good

the endowment bundle - is always on the budget constraint

p1w1 + p2w2 > p1w1’ + p2w2’ - the original endowment is worth more than the new endowment, meaning the new endowment makes the consumer worse off because the consumption possibilities is less

normal good 1, with new endowment worth less - demand for good 1 will decrease

true or false: with endowment, changing prices changes income - TRUE

With endowment, if P1 decreases - the budget line becomes flatter and endowment bundle is still affordable

with endowment, if P1 increases, the budget line becomes steeper and endowment bundle is still affordable

impact of P increase on net buyers - net buyers will be worse off than before

Impact of price decrease on buyers - according to revealed preference, they must remain a buyer

impact of p increase on net seller - according to revealed preference, they must remain a seller