6. Consumer Theory

6. Consumer Theory - p a = $1/unit p b = $1/unit I = $8 8...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Principles of Microeconomics Shomu Banerjee Emory University Fall 2011 6. Consumer theory
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Agenda: Consumer theory BUDGET BUDGET PREFERENCES PREFERENCES CHOICE CHOICE INDIVIDUAL DEMAND INDIVIDUAL DEMAND MARKET DEMAND MARKET DEMAND
Background image of page 2
Consumer theory model A1• There are 2 divisible goods, a and b A2• The per-unit prices, p a and p b , are fixed A3• The consumer has a fixed level of income, I, to spend Budget constraint
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Budget b a 0 8 Budget 4 p a = $2/unit p b = $1/unit I = $8
Background image of page 4
Budget shift: Income b a 0 8 Old Budget 4 p a = $2/unit p b = $1/unit I = $10 New Budget 5 10
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Budget pivot b a 0 Old Budget 4
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: p a = $1/unit p b = $1/unit I = $8 8 New Budget 8 Preferences Total utility Slices 10 9 7 4 1 2 3 4 5 6 Total utility Marginal utility Slice Consumer theory model A1 There are 2 divisible goods, a and b A2 The per-unit prices, p a and p b , are fixed A3 The consumer has a fixed level of income, I A4 The consumers preferences are represented by an utility function A5 The consumer satisfies the law of diminishing marginal utility A6 More of each good is always better...
View Full Document

Page1 / 8

6. Consumer Theory - p a = $1/unit p b = $1/unit I = $8 8...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online