1. Consumer Choice

2. Learning Objectives: Understanding consumer opportunity and consumer preference How do changes in price and income influence consumer choice? How do workers decide how long to work?

3. Ordering of Consumer Preference Preferred choice vs. Indifferent choice Basic Properties: Completeness More is better Diminishing marginal rate of substitution Transitivity

4. Indifference Curve

5. Budget Constraint

6. Consumer Equilibrium

7. Comparative Statics Change in optimal consumption due to price and income changes Substitutes vs Complements Example: Want people to drink less? Make their cigarettes more expensive Example: Cheap gas makes suburban houses more valuable Example: What Happens to Broadway Shows After Movie Versions Hit Screens?

8. Comparative Statics (contd.) Income effect and substitution effect Normal Good versus Inferior Good Kinked choice set Example: Optimal product mix in a supermarket

9. Labor Leisure Choice How do workers decide how long to work? The economics of overtime

10. Individual Demand Curve From indifference curve to individual demand curve From individual demand curves to market demand curve