Chapter 6 Household Behavior and Consumer Choice

Chapter 6 Household Behavior and Consumer Choice - Chapter...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
How much of each product to demand How much labor to supply How much to spend and save Households must make 3 basic decisions: Budget constraint: the limits imposed on household choices by income, wealth, and product prices Choice set OR opportunity set: the set of options that is defined and limited by a budget constraint Separates the combinations of goods and services that are available, given limited income, from those that are not The available options make up the opportunity set Real income: the set of opportunities to purchase real goods and services available to a household as determined by prices and money income (Px) (X) +(Py)(Y)= I, where Px is the price of X, X I the quantity of X consumed, same for Py and Y respectively, and I is the household income BUDGET CONSTRAINT: Utility: the satisfaction a product yields Marginal utility: the additional satisfaction gained by the consumption or use of one more unit of a good or service
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/09/2012 for the course ECON 2106 taught by Professor Minjaesong during the Fall '06 term at Georgia Tech.

Ask a homework question - tutors are online