
Lec 4: Demand Curves and Income/Substitution Effects
Jonathan Gruber continues MIT's 14.01 Principles of Microeconomics with a lecture on how demand curves are built from consumer choice theory. He derives a demand curve from an individual's optimization problem, explains why it slopes the way it does, and walks through what happens when income shifts the whole curve versus when a price change moves a consumer along it. The lecture separates that price effect into income and substitution components, showing how a good can be more or less sensitive to each depending on its properties. Gruber works through the logic at the chalkboard with graphs built up step by step, the standard format for this course, aimed at undergraduates who have already covered budget constraints and indifference curves in earlier sessions.