Ch12___Consumer_Theory__Handouts_

# Ch12___Consumer_Theory__Handouts_ - Consumer Choice and...

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Consumer Choice and emand CHAPTER 12 Demand

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C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Calculate and graph a budget line that shows the limits to a person’s consumption possibilities. 2 Explain the marginal utility theory and use it to derive a consumer’s demand curve.

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C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Calculate and graph a budget line that shows the limits to a person’s consumption possibilities. 2 Explain the marginal utility theory and use it to derive a consumer’s demand curve.
12.1 CONSUMPTION POSSIBILITIES ± The Budget Line A budget line describes the limits to consumption choices and depends on a consumer’s budget and the prices of goods and services. et’s look at Tina’s budget line: Let s look at Tina s budget line: Tina has \$4 a day to spend on two goods: bottled water nd gum and gum. The price of water is \$1 a bottle. he price of gum is 50 a pack The price of gum is 50¢ a pack.

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12.1 CONSUMPTION POSSIBILITIES Pw = Price of Water Pg = Price of Gum Qw = Quantity of Water g Qg = Quantity of Gum Pw Qw Water (\$) Pg Qg Gum(\$) Income \$1 \$0.5 \$4 1 0 5 4 \$1 \$0.5 \$4 \$1 \$0.5 \$4 \$1 \$0.5 \$4 \$1 \$0.5 \$4
12.1 CONSUMPTION POSSIBILITIES Pw = Price of Water Pg = Price of Gum Qw = Quantity of Water g Qg = Quantity of Gum Pw Qw Water (\$) Pg Qg Gum(\$) Income \$1 0 \$0.5 \$4 1 0 5 4 \$1 1 \$0.5 \$4 \$1 2 \$0.5 \$4 \$1 3 \$0.5 \$4 \$1 4 \$0.5 \$4 Fill in the blanks

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12.1 CONSUMPTION POSSIBILITIES Pw = Price of Water Pg = Price of Gum Qw = Quantity of Water g Qg = Quantity of Gum Pw Qw Water (\$) Pg Qg Gum(\$) Income \$1 0 \$0.5 \$4 1 0 5 4 \$1 1 \$0.5 \$4 \$1 2 \$0.5 \$4 \$1 3 \$0.5 \$4 \$1 4 \$0.5 \$4
12.1 CONSUMPTION POSSIBILITIES Tina’s consumption possibilities. Points A through E n the graph on the graph represent the rows of the table. The line passing through the points is Tina’s budget line.

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12.1 CONSUMPTION POSSIBILITIES The budget line eparates separates combinations that are affordable from combinations that are unaffordable.

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12.1 CONSUMPTION POSSIBILITIES ± A Change in the Budget When a consumer’s budget increases, consumption possibilities ______. When a consumer’s budget decreases, consumption possibilities _____.
12.1 CONSUMPTION POSSIBILITIES Pw Qw Water (\$) Pg Qg Gum(\$) Income Q (\$) g (\$) \$1 0 \$0 \$0.5 8 \$4 \$4 \$1 1 \$1 \$0.5 6 \$3 \$4 1 2 0 5 2 4 \$1 2 \$2 \$0.5 4 \$2 \$4 \$1 3 \$3 \$0.5 2 \$1 \$4 \$1 4 \$4 \$0.5 0 \$0 \$4 Pw Qw Water (\$) Pg Qg Gum(\$) Income \$1 0 \$0.5 \$2 \$1 1 \$0.5 \$2 \$1 2 \$0.5 \$2 \$ 13 \$0.5 \$2 \$1 4 \$0.5 \$2

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12.1 CONSUMPTION POSSIBILITIES Pw Qw Water (\$) Pg Qg Gum(\$)
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Ch12___Consumer_Theory__Handouts_ - Consumer Choice and...

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