CONSUMER THEORY

Oct 27, 2013

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SCARCITY. 2 Products (Goods or Services): X1 and X2Fixed money income: MGiven prices: p1 and p2Income constraint:p1X1 p2X2 = MRearranging,X2 = M/p2 (p1/p2)X1Slope: ?X2/ ?X1 = - (p1/p2). Budget Set and Constraint for Two Products. . . x2. x1. Budget constraint isp1x1 p2x2 = m . m /p

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CONSUMER THEORY

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Presentation Transcript

The Consumer Theory

The Consumer Theory . How Consumers Make Choices under Income Constraints . Some Questions . What is behind a consumer’s demand curve? How do consumers choose from among various consumer “goods”? What determines the value of a consumer good? . Utility .

1.07k views • 30 slides

Behavioral consumer theory

Behavioral consumer theory. How should firms profit-max with behavioral consumers? Procrastinating consumers Blockbuster…huge profit from late fees, forecasting error + loss-aversion? Credit card “teaser rates” (Ausubel AER 91?) Only 70% pay off balance, average household balance $5,000

361 views • 3 slides

Consumer Choice Theory

Consumer Choice Theory. Key Concepts Summary. ©2005 South-Western College Publishing. What does this chapter cover?. It takes a closer look at movements along the demand and supply curves introduced in the previous chapter. What is util?.

1.01k views • 48 slides

Theory of Consumer Behavior

Theory of Consumer Behavior. Chapter 3. Topics of Discussion. Utility Theory Total Utility (Satisfaction) Marginal Utility Meet Carl or Carla Consumer Law of Diminishing Marginal Utility. Indifference Curves Concept of Isoutility Marginal Rate of Substitution.

372 views • 30 slides

Applications of Consumer Theory

Applications of Consumer Theory. Derivation of Demand; Income and Substitution Effects; In Kind vs Cash Transfers; Labor/leisure Tradeoff; CPI. Indifference Curves Describe Tastes of Individual Consumer. Derivation of demand. Individual Demand. P Q 2.5 40 5 20 10 10 .

626 views • 17 slides

Consumer Theory

Consumer Theory. Consumers choose the best bundles of goods they can afford. Can afford – Budget constraints . “Best” – according to preferences . Why is it useful? Predict behavior changes. Policy analysis. Consumption Choice Sets.

435 views • 11 slides

Theory of Consumer Choice

Theory of Consumer Choice. Main Assumption. Homo- Economus The Economic Man Assume people are rational and make rational decisions That is, they “maximize” or “minimize” correctly. Consumer Problem. Maximize happiness (or utility) Constrained by prices in the market and their budget

456 views • 18 slides

Theory of Consumer Behavior

Theory of Consumer Behavior. Mr. Henry AP Economics. Review. Mr. Lucot eats five slices of pizza on a Saturday night but admits each slice of pizza doesn’t taste as good as the previous one. This suggests that for Mr. Lucot :

379 views • 12 slides

Theory of Consumer Behavior

Theory of Consumer Behavior. Chapter 3. Discussion Topics. The concept of consumer utility (satisfaction) Evaluation of alternative consumption bundles using indifference curves What is the role of your budget constraint in determining what you purchase?. 2. The Utility Function.

772 views • 48 slides

Consumer Theory (Applications)

Consumer Theory (Applications). Tutorial 5. Applying Consumer Theory. Using consumer theory, we can examine the changes in the consumer choices whenever there is a change in an exogenous determinant.

320 views • 17 slides

Theory of Consumer Behaviour

Theory of Consumer Behaviour. Topic no. 4. Introduction. Each consumer has to face the problem of multiplicity of wants and limited income. In such state of affairs it is the desire of each consumer to maximize his satisfaction in the presence of income constraint.

774 views • 44 slides

Consumer Theory

Consumer Theory. Introduction Budget Set/line Study of Preferences Maximizing Utility. Introduction. Where does the law of demand come from? Consumption choices depend on two factors: 1. What choices you can afford (budget set) 2. What choices you like (study of preferences).

569 views • 25 slides

Consumer Theory

Consumer Theory. What is Consumer Theory?. Study of how people use their limited means to make purposeful choices. Assumes that consumers understand their choices (possibilities) and the prices (opportunity costs) associated with each choice.

751 views • 49 slides

Consumer Theory: Objectives

Consumer Theory: Objectives. Derive and understand: How Rational People make Choices 2. How this should Guide our own Decisions. Consumer Behavior. We are now studying the foundations of demand theory. - Why do demand curves slope downward?

293 views • 13 slides

Theory of Consumer Behavior

Theory of Consumer Behavior. Chapter 3. Discussion Topics. Utility theory Indifference curves The budget constraint. Utility Function. A utility function is an algebraic expression that allows us to rank consumption bundles or combinations of goods.

1.84k views • 32 slides

The Consumer Theory

The Consumer Theory. How Consumers Make Choices under Income Constraints. Some Questions. What is behind a consumer’s demand curve? How do consumers choose from among various consumer “goods”? What determines the value of a consumer good?. Preferences.

661 views • 39 slides

Section 2 - Consumer Theory

Section 2 - Consumer Theory. Consumer theory attempts to explain why consumers choose one good or bundle of goods over another good or bundle of goods. Section 2 - Consumer Theory. In Consumer Theory we will discuss: Consumer Utility (Chapter 3) Utility and Constraints (Chapter 4)

636 views • 51 slides

Extensions to Consumer theory

Extensions to Consumer theory. Inter-temporal choice Uncertainty Revealed preferences. Extensions to Consumer theory. We now know how a consumer chooses the most satisfying bundle out of the ones it can afford

499 views • 42 slides

Consumer Choice: Indifference Theory

Consumer Choice: Indifference Theory. The basic assumption here is that consumers are motivated to make themselves as well off as they can, or as economists like to put it: to maximize their satisfaction, or utility.

778 views • 75 slides

Section 2 - Consumer Theory

Section 2 - Consumer Theory. Consumer theory attempts to explain why consumers make choices: one good or bundle of goods over another good or bundle of goods. Section 2 - Consumer Theory. In Consumer Theory we will discuss: Consumer Utility (Chapter 3) Utility and Constraints (Chapter 4)

505 views • 50 slides

Consumer Demand Theory II

Consumer Demand Theory II. Session 3, EA 4 th July, 2007 Prof. Samar K. Datta. Overview of items intended to be covered in this session. Consumer Choice Interpretation of consumer equilibrium: Equi-marginal principle Corner solution Diminishing MU & diminishing MRS

262 views • 25 slides

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