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Presentation consumer behaviour

Presentation consumer behaviour - Session II and...

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Session II and III-Consumer Behaviour (or, Rational choice theory) Microeconomics for Managers Term- I
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Scope and Objective CB In Economics teaches-how a consumer makes rational choices in the market given limited resources. ‘Rationality’≠ Sanity. Very crudely it means consistency and self-interest maximization. Main elements consumer ‘s preferences budget line consumer’s choice (demand theory). ‘a consumer’ here is the ‘typical’ consumer
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Consumer preference: main approaches Utility theory and indifference curve approach ( Highlight for today ) Revealed preference approach Characteristics approach What is utility? Mental satisfaction a consumer gets from consuming a good -subjective in nature, may change depending on time and place.
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Utility theory: cardinal approach Utility can be measured. Marginal utility and diminishing marginal utility.
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An example of diminishing MU
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Utility theory: cardinal approach (two-dimensional space) Ordinal utility-based on ranking of goods.
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