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UNIT 21: The Theory of Consumer Choice, budget constraint and Indifference…
UNIT 21: The Theory of Consumer Choice
Budget
What the Consumer Can Afford
A consumer’s budget
constraint
(giới hạn): show the options for buying different items based on
their income
and
the prices of item
.
Example:
Thai Cong divides his income between two goods: fish and mangos.
Thai Cong’s income: $1200
price fish: $4
Price mango: $1
Ox: Q mango
Oy: Q fish
1200 mango
300 fist
100 fist, 800 mango
SLOPE= -4
=> give up 4 mangos to get 1 fish
góc nhọn= đối/kề
A fall in income
Q mango and Q fish ↓
An increase in the price of one good
↓Q this good
Preferences: What the Consumer Wants
Indifference(thờ ơ) curve:
shows consumption bundles(gói tiêu thụ) that give the consumer the same level of satisfaction(hài lòng)
đường cong I chứa điểm A ,B mà lựa chọn trên đó đều hài lòng
If the quantity of 1 goods↓, the quantity of other goods must be↑ to keep Thai Cong happy
Thai Cong want by buy in higher Indifference curve
Indifference curves
cannot cross.
Indifference curves are bowed inward (ngả vào trong)
Cong is willing to give up more mangos for a fish.
If he has few fish than mango
budget constraint and Indifference curve
