Fall term 2019 Doçent Dr S.J. Terregrossa, Ph.

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Study guide/Problem set 11: individual demand function (di)
ECO 191 Microeconomics Istanbul Aydin University

Using primarily information from the class lectures, in your lecture notes; and also the text,
answer the following questions:

1) Explain the underlying concept of a downward sloping demand curve. (In other words,
explain the main reason why a demand curve slopes downward.)

2) Individual i has a demand function for good x (di). Included in this demand function (but
not limited to) is the price of good x, the individual’s income (yi), her/his set of tastes
and preferences (T&P)i, and the prices of related goods (Po).

This demand function (di) in table form is given as:

p qd
10 2 units

8 4 units
6 6 units
4 8 units
2 10 units

(Note: It is advisable to use a different diagram for each of the below exercises.)

a) Construct the demand function (di) in diagram form.

b) Consider a price change from 4 to 10 , ceteris paribus. Explain the response of the
individual demander. Thoroughly indicate on the diagram. (Use the examples from
class or the text as a guide to your diagram indications.)

c) Consider a price change from 8 to 4 , ceteris paribus. Explain the response of the
individual demander. Thoroughly indicate on the diagram. (Use the examples from
class or the text as a guide to your diagram indications.)
d) Suppose the individual’s income (yi) increases. Explain the response of the individual
demander. Thoroughly indicate on the diagram. (Use the examples from class or
the text as a guide to your diagram indications.)

e) Suppose the individual’s income (yi) decreases. Explain the response of the individual
demander. Thoroughly indicate on the diagram. (Use the examples from class as a
guide to your diagram indications.)

f) Explain the different types of related products (substitutes and complements).

g) Explain how an increase in the price of a substitute (Po) affects the demand function
for good x. Thoroughly indicate on the diagram. (Use the examples from class or the
text as a guide to your diagram indications.)

h) Explain how a decrease in the price of a substitute (P o) affects the demand function
for good x. Thoroughly indicate on the diagram. (Use the examples from class or the
text as a guide to your diagram indications.)

i) Explain how an increase in the price of a complement (P o) affects the demand

function for good x. Thoroughly indicate on the diagram. (Use the examples from
class or the text as a guide to your diagram indications.)

j) Explain how a decrease in the price of a complement (P o) affects the demand

function for good x. Thoroughly indicate on the diagram. (Use the examples from
class or the text as a guide to your diagram indications.)

(Note: It is advisable to use a separate diagram for each of the above exercises.)