Theme1_preferences_A08AN

Theme1_preferences_A08AN - Consumer preferences 2 Consumer...

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Consumer preferences
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2 How does an individual make consumption decisions? Why do markets exist? Consumer behavior
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3 Bundles of goods Consider a consumer who can buy books and movies (DVDs). Then, we say that (5 DVDs, 3 books) is a bundle of goods , which we denote (5,3).
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4 In your opinion : Will a consumer prefer the bundle (5,3) or the bundle (3,2)? Why? This property is the monotonicity property . Moreover, if this consumer prefers (3,2) to (2,4). Which will he prefer between (5,3) and (2,4)? Why? This property is called transitivity . Consumer preferences
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5 Graphically: Indifference curves Graphically display the preferences of the consumer (Suppose, in addition, that this consumer is indifferent between (3,2) and (4,1).) books DVDs
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6 Properties of indifference curves (IC) Can two ICs cross? Why or why not? Can an IC slope upward? Why or why not? Good X Good X Good Y Good Y
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Typical shape of ICs ICs typically look like this How would you interpret this shape? Good X
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This note was uploaded on 11/01/2010 for the course BUSINESS 2789 taught by Professor Carl during the Fall '08 term at HEC Montreal.

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Theme1_preferences_A08AN - Consumer preferences 2 Consumer...

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