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Consumer Theory - Ad-valorem=Tax/Equilibrium Price > =...

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Ad-valorem=Tax/Equilibrium Price > = preferred to A>B, means A is preferred to B ~ = indifferent to C~D, means A is indifferent to B Consumer Theory The goal of the consumer is to find the best , affordable bundle of goods. Utility is satisfaction from consumption. Bundle is some combination of goods. We often pretend that we are in a 2 good world. (C,F)=(6,9) (6 units of clothing, 9 units of food) We do NOT assume that the consumer behaves randomly. Assume consumer is a rational decision maker. Preferences tell us what’s best. a.k.a. Tastes Assumptions: 1. Completeness: compare any two bundles a,b. (a>b, b>a, or a~b)
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