Class5 - Econ 100 James Bushnell Class 5: Consumer...

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Econ 100 1 Winter 2012: Professor Bushnell Econ 100 James Bushnell Class 5: Consumer Preferences 1
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Econ 100 2 Winter 2012: Professor Bushnell Where do demand curves come from? • Individual preferences determine the amount of pleasure people derive from the goods and services they consume. • Consumers face constraints or limits on their choices. • Consumers maximize their well-being or pleasure from consumption, subject to the constraints they face. • As prices change, consumption also change as consumers re-optimize their purchases
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Econ 100 3 Winter 2012: Professor Bushnell Properties of Consumer Preferences (what we assume for this to work) Completeness – can always rank preferences between two bundles (even if they tie) Transitivity – if A better than B and B better than C, then A is better than C “More” is Better (free disposal) – all else equal more of a good is better than less of it (can always throw it away)
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Econ 100 4 Winter 2012: Professor Bushnell Properties of Consumer Preferences More Is Better - all else being the same, more of a commodity is better than less of it (always wanting more is known as nonsatiation ). Good - a commodity for which more is preferred to less Bad - something for which less is preferred to more, such as pollution
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Econ 100 5 Winter 2012: Professor Bushnell Preference Maps Indifference curve - the set of all bundles of goods that a consumer views as being equally desirable. Indifference map - a complete set of indifference curves that summarize a consumer’s tastes or preferences
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Econ 100 Winter 2012: Professor Bushnell Bundles of Pizzas and Burritos B , Bur r itos per semester (a) 30 25 15 Z , Pizzas per semester 25 20 15 10 5 d a e f A B 30 25 15 Z , Pizzas per semester 25 a I 1 e c Which of these two bundles would be preferred by Lisa?
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This note was uploaded on 02/01/2012 for the course ECN 100 taught by Professor Parman during the Winter '08 term at UC Davis.

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Class5 - Econ 100 James Bushnell Class 5: Consumer...

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