Ad-valorem=Tax/Equilibrium Price> = preferred toA>B, means A is preferred to B~ = indifferent toC~D, means A is indifferent to BConsumer TheoryThe goal of the consumer is to find the best, affordablebundle 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. TastesAssumptions:1.Completeness: compare any two bundles a,b. (a>b, b>a, or a~b)
This is the end of the preview.
access the rest of the document.