Consumer Purchase Decisions #2

Consumer Purchase Decisions #2 - Consumer Purchase...

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1 Microeconomics Principles February 25, 2008 Consumer Purchase Decisions Administrative Exam Review Session: z Tomorrow (Tuesday 2/26) at 5pm z Location: D.P. Corbett 115 For Exam: z Bring Pencil z Bring your Empl ID from WebCT (look under ‘my grades’) z May bring a calculator (for elasticity calculations) Today’s Outline Finish Chap 7 Appendix Exam Wrap- Up You proved…. Utility Maximizing Rule z Allocate income so that last dollar spent on each activity yields the same MU z Put Marginal Utility on a per-dollar spent basis! z Mu 1 /P 1 = Mu 2 /P 2 Examples cont. Units MU MU 1 /P 1 MU2 MU 2 /P 2 1 10 10 24 12 2 8 8 20 10 3 7 7 18 9 4 6 6 16 8 5 5 5 12 6 If P 1 = 1, P 2 =2 How would you spend your money?? MU Per dollar! Graphing…Chapter 7 Appendix How do we graph the “indifference” when MU/P = MU2/P2?
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2 Indifference Curve Analysis 2 4 6 8 10 12 Quantity of A 6 8 10 12 4 2 0 Quantity of B Combination Units of A Units of B j k l m 12 6 4 3 2 4 6 8 j k l m I 10 Utility 10 10 10 The Indifference Map 24681 01 2 6 8 10 12 4 2 0 Quantity of B I
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This note was uploaded on 04/18/2008 for the course PHY 121 taught by Professor Smith during the Spring '08 term at University of Maine Orono .

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Consumer Purchase Decisions #2 - Consumer Purchase...

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