Chapter07S.pdf - Principles of Microeconomics(Microeconomics by Karlan\/Morduch Chapter 07 Consumer Behavior Appendix E Indifference curves Hossein A

Chapter07S.pdf - Principles of...

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Principles of Microeconomics (Microeconomics, by: Karlan / Morduch ) Chapter 07: Consumer Behavior Appendix E: Indifference curves Hossein A. Abbasi University of Maryland, College Park
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What will you learn in this chapter? Consumer theory: maximizing utility subject to budget constraints. How revealed preferences relate to utility. How budget constraints affect utility maximization. How income affects consumption choices. How prices affect consumption choices and how to distinguish between income and substitution effects. How utility is influenced by outside perceptions, and how people get utility from altruism and reciprocity.
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7-3 Utility is a measure of the amount of satisfaction a person derives from something. Incorporates emotions and sensations. Universal measure (or yardstick) that allows individuals to compare choices . Not typically comparable across individuals. Rational individuals maximize utility when making choices. Ut il ity basics
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