TAILIEUCHUNG - Lecture Business economics - Lecture 6: The theory of consumer choice - II

The following will be discussed in this chapter: budget constraint, indifference curve, properties of indifference curve, optimal choices, income effect on consumer choice, price effect on consumer choice, income and substitution effect. | Review of the previous lecture A consumer’s budget constraint shows the possible combinations of different goods he can buy given his income and the prices of the goods. The slope of the budget constraint equals the relative price of the goods. The consumer’s indifference curves represent his preferences. Points on higher indifference curves are preferred to points on lower indifference curves. The slope of an indifference curve at any point is the consumer’s marginal rate of substitution. The consumer optimizes by choosing the point on his budget constraint that lies on the highest indifference curve. Lecture 6 The theory of consumer choice - II Instructor: Abbas Course code: ECO 400 Lecture Outline Optimal choices Income effect on consumer choice Price effect on consumer choice Income and substitution effect Optimization: what the consumer chooses Consumers want to get the combination of goods on the highest possible indifference curve. However, the consumer must also

• Kinh tế học
• Business economics
• Lecture Business economics
• Business applications of economics
• Open economy
• Competitive markets
• Consumer choice
• Economic Models
• Principles of economics
• Economics of agriculture
• Monopolistic competition
• Macroeconomic policy
• Supply curve
• Elasticity of demand
• Competitive firms
• Imperfect competition
• Gross domestic product
• Financial intermediaries
• Productivity growth
• Natural rate of unemployment
• Labor force
• Money supply