2_ConsumerPreferences

2_ConsumerPreferences - 2. CONSUMER PREFERENCES Pindyck...

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2. CONSUMER PREFERENCES Pindyck & Rubinfeld 3.1, 3.2, 3.3
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e economist’s point of view… The economist s point of view… To analyse how a person decides how much to buy, we need three fundamentals: the person’s preferences ow much do they value each option? How much do they value each option? the person’s budget constraint pg Which options are available to them? A decision rule How do they choose?
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ommon properties of indifference curves Common properties of indifference curves 1. Completeness consumers can compare and rank all possible baskets. for any two market baskets A and B , a consumer can say either that she prefers A to B , or she prefers B to A , or she is indifferent between the two
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ommon properties of indifference curves Common properties of indifference curves 2. Transitivity if a consumer prefers basket A to basket B, and prefers basket B to basket C , then he also prefers A to C (A a B) & (B a C) » A a C
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This note was uploaded on 07/30/2011 for the course ECO 112 taught by Professor Man during the Spring '11 term at HKU.

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2_ConsumerPreferences - 2. CONSUMER PREFERENCES Pindyck...

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