2
Budget Constraint
Monopoly
Game Theory
P
Industrial Supply
Firm supply
Cost curves
Profit Max
Preference
Technology
Utility
Budget Constraint
Choice
Individual Demand
Market Demand
Q
Externality
Public Goods
2
The principle of the consumer
theory
Consum
3
Preferences
Where are we in the
Microeconomics?
2
What Do We Mean by
Preference? ( )
It refers to the ordered relationship
among alternative choices given by an
economic agent.
Ranking the choices
In most economic literature, consumer
preference is tre
4
Utility
Review the previous chapters
1 The market
2 Budget constraint
3 Preferences
4 Utility
2
What Do We Do in This Chapter?
We create a mathematical measure
of preference in order to advance
our analysis.
3
Preferences - Expression
x y: x is prefe
5
Choice
Where Are We Doing in This
Chapter?
After modeling a consumers choice
set(B.C.) and his preference (U.F.), we
now put them together and model how
he/she makes optimal choice.
In mathematical terms, this is a
constrained maximization problem;
In
6
Demand
What Do We Do in This Chapter?
We conduct comparative statics
analysis of ordinary demand
functions - the study of how ordinary
demands x1*(p1,p2,y) and x2*(p1,p2,y)
change as prices p1, p2 and income y
change.
2
Own-Price Changes
How does x1*(p1
Review previous chapters
1 The market
2 Budget Constraint, Preferences
3 Utility, Choice
4 Demand
5 Consumers Surplus (14), Market
Demand (15)
1
14
Consumers Surplus
What Do We Do in This Chapter?
After studying consumers choices,
we now examine consu
18
Technology
Where Are We in the Course?
We have studied consumer behavior;
We now study producer behavior;
2
Consumer theory and producer theory
3
Three Steps to Study of Producer
Behavior
1st: We work on producers budget
set, which is the technology s
19
Profit-Maximization
18 Technology
Production function and isoquants
Marginal product and returns-toscale
Technical rate of substitution
Long-run and short-run production
functions
2
Production function
One input, one output
Output Level
y
y = f(x) i