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Bec doms ppt on consumer choice

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Babasab Patil
Babasab Patil

Bec doms ppt on consumer choice

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Consumer Choice ,[object Object],[object Object],[object Object],[object Object]
I. Utility Analysis ,[object Object],[object Object],[object Object],[object Object]
total utility (TU) ,[object Object],[object Object],[object Object]
[object Object],< TU 2 cookies TU 3 cookies
marginal utility (MU) ,[object Object],[object Object],[object Object],[object Object],[object Object]
change in TU from 0 to 1 cookie change in TU from 1 cookie to 2 cookies MU of 1 st cookie MU of 2 nd cookie = = 0
diminishing marginal utility ,[object Object],[object Object]
MU of 1 st cookie > MU of 2 nd cookie 0
TU rises at slower and slower rate as MU declines TU cookie MU cookie
How to maximize TU? ,[object Object],[object Object],[object Object]
[object Object],price of cookies price of milk MU cookies = MU milk
why? ,[object Object],[object Object],[object Object],[object Object],[object Object]
TU vs. MU ,[object Object],[object Object],[object Object],[object Object]
why? ,[object Object],[object Object],[object Object],[object Object],[object Object]
MU and demand ,[object Object],[object Object],[object Object]
example : pizza for 4th pizza for 2nd pizza P Q D $10 4 pizzas willing to pay $10 $15 2 pizza willing to pay $15
II. Consumer Surplus ,[object Object],[object Object]
example ,[object Object],[object Object],[object Object]
my demand curve P Q D $10 $12 3 my consumer surplus
area between D and price of pizza P Q D $10 10,000 total consumer surplus
III. The Budget Line ,[object Object],[object Object],[object Object],[object Object],[object Object]
example ,[object Object],[object Object],[object Object],[object Object]
possible combinations 0 2 4 6 8 4 3 2 1 0 cookies milk
budget line milk cookies 8 4 2 6 0 4 2 1 3
budget line milk cookies Affordable Unaffordable 8 4 2 6 0 4 2 1 3
what if prices change? ,[object Object],[object Object]
budget line milk cookies 8 4 2 6 0 4 2 1 3 cookie = $.50 cookie = $1
what if budget changes ,[object Object],[object Object]
milk cookies budget = $4 budget = $5 8 4 2 6 0 10 4 2 1 3 5
IV. Indifference Curves ,[object Object],[object Object],[object Object],[object Object]
example: milk and cookies milk cookies Every point on curve has same total utility 8 4 2 6 0 4 2 1 3 Indifference curve
TU is higher as curve shifts right milk cookies higher TU lower TU
consumer equilibrium ,[object Object],[object Object]
consumer equilibrium best affordable point cookies 8 milk 4 4 2
consumer equilibrium best affordable point cookies 8 milk 4 4 2
sum it up ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

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