Substitution and Income Effect, Topics in Demand and Supply Analysis, CFA Level I, Economics
Sep 4,20Blog article 4, Substitution and Income Effect, Topics in Demand and Supply Analysis, CFA Level 1 Economics We consider the household optimum in a two-goods world.If the price of the first good rises, then the budget line turns inwards on the x1 axis. We can then distinguish between – Overall effect, – Substitution effect and – Income effect where the …
Read MoreMonopoly, CFA Level I, Economics, The Firm and Market Structures
Sep 3,20Blog article 3, CFA Level 1 Economics This blog post deals with an important topic from Reading 15, “The Firm and Market Structures“, namely the calculation of the optimal quantity and the optimal price in a monopoly. 1. The monopolist must first know the inverse demand function (P = a – b*Q). So if only the demand function (Q = …
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