1. 1 CHAPTER 5 CONSUMER CHOICE E CONOMICS U PDATED S ECOND E DITION R OBERT E. H ALL S TANFORD U NIVERSITY M ARC L IEBERMAN N EW Y ORK U NIVERSITY

2. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 2 Figure 1The Budget Constraint Number of Concerts per Month Number of Movies per Month A 15 12 9 6 3 12 34 5 B C D E G H F Max’s Consumption Possibilities with Income of $150 Concerts at $30 eachMovies at $10 each Total Expenditure on Concerts Total Expenditure on MoviesQuantity A0$015$150 B1$3012 20 C2$609$90 D3$ 6$60 E4$1203$30 F5 500$0

3. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 3 Figure 2Changes in the Budget Line Number of Concerts per Month Number of Concerts per Month Number of Concerts per Month Number of Movies per Month 5 Number of Movies per Month Number of Movies per Month 15 5 (a)(b)(c) 10 30 5 15 30

4. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 4 Figure 3Total and Marginal Utility Ice Cream Cones per Week Utils 1 60 50 40 70 30 20 10 2 3 45 6 Ice Cream Cones per Week Utils Total Utility Marginal Utility 30 20 10 1 2 3 45 6 (a) (b) Lisa’s Total and Marginal Utility from Consuming Ice Cream Cones Number of Cones Total Utility Marginal Utility 00 utils 3 13 2 25 1 360 utils 5 utils 465 utils 3 utils 568 utils 0 utils 668 utils

5. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 5 Figure 4Consumer Decision Making Number of Concerts per Month Number of Movies per Month A 15 12 9 6 3 1234 5 B C D E G F CONCERTS at $30 eachMOVIES at $10 each (4)(7) MarginalMarginal Utility per Dollar (1)(2)(3)Spent on(5)(6)Spent on Point onNumber ofMarginalLast ConcertNumberMarginalLast Movie BudgetConcerts perUtility from(MU concerts /of MoviesUtility from(MU movies / LineMonthLast ConcertP concerts )per MonthLast MovieP movies ) A0——15505 B11,50050121 10 C21,20040915015 D360020620020 E439013335035 F5300100—

6. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 6 Figure 5Effects of an Increase in Income Number of Concerts per Month Number of Movies per Month A 30 12345 B C D E F 678910 15 12 9 6 3 H ´ H H ´´ 27

7. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 7 Figure 6Deriving the Demand Curve Number of Concerts per Month Number of Movies per Month 15 9 6 3 12345 D 6 (a) K ´ 0 Number of Concerts per Month Price per Concert (b) D Max's Demand Curve for Concerts $30 12345 J 10 15 J ´ 11 J 6 30 K 12 K 5

8. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 8 Figure 7Income and Substitution Effects

9. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 9 Figure 8From Individual to Market Demand

10. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 10 Figure 9Time Allocation Economics Score C 90 French Score 90 70 80 7580 F E D

11. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 11 Figure A.1An Indifference Curve

12. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 12 Figure A.2An Indifference Map

13. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 13 Figure A.3Consumer Decision Making Minutes of Phone Time U n i t s o f A l l O t h e r G o o d s 20 E S 200 R 160 100

14. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 14 Figure A.4 Deriving the Demand Curve P r i c e p e r M i n u t e o f P h o n e T i m e Minutes of Phone Time Minutes of Phone Time E F Kate’s Demand for Phone Time $2 1 20 30 (b) 20 30 100 200 U n i t s o f A l l O t h e r G o o d s E F 170 160 (a)