micro-consumer theory

[ritu]

1.does inferior good generate any consumer surplus?

2.if over the relevant range,price offer curve is horizontal to x-axis,then is demand curve for this good a straight line?

3.if the slope of an IC is -x2/x1,wot can we say abt its-
a.demand curve
b.price elasticity of dd
c.income elasticity
d.engel curve?

[Bellatrix]

If you are talking about the good, whose quanity demanded with change in prices is constant, then it will have a vertical demand curve. Because notice, horizontal offer curves come in Quasi linear preferences.

For the third question, take U=x1.x2 Then solve the consumer's problem.

[ritu]

part b-pls correct me if i am wrong.........
i guess for the good on x-axis dd curve wud be downward sloping coz as price of it falls,its qty is increasing....and the gud on vertical axis-s demand function is independent of P1 but we cant say anything abt its shape with this info...


somebdy pls answer part  1...does inferior gud ave any consumer surplus?

[anon_econ]

Why r u assuming that the price offer curve shows u only what happens when px changes? It actually shows u what happens when px/py changes. Say px is kept constant & py keeps rising. The budget constraint keeps becoming flatter but the quantity of y remains unchanged.
I think the demand curve for good y would be vertical & that for good x would be downward sloping.

I don't know about the inferior good question..if it's an ordinary good, I can't see why there wud not be any consumer surplus. Dunno what happens if it's a giffen good though..