Chapter 7 Consumer Behavior & Utility Maximization.

Slides:

Advertisements

Similar presentations

Consumer Behavior and Utility Maximization

Advertisements

Copyright McGraw-Hill/Irwin, 2002 The Law of Demand Law of Diminishing Marginal Utility Total and Marginal Utility Theory of Consumer Behavior.

Chapter 7: Consumer choice

Slides prepared by Dr. Amy Peng, Ryerson University Part Two: Microeconomics of Product Markets CHAPTER 5 CONSUMER CHOICE AND UTILITY MAXIMIZATION.

8 - 1 Copyright McGraw-Hill/Irwin, 2005 The Law of Demand Law of Diminishing Marginal Utility Total and Marginal Utility Theory of Consumer Behavior Utility.

In this chapter, look for the answers to these questions:

Consumer Behavior and Utility Maximization 21 C H A P T E R.

Utility and Demand CHAPTER 7. 2 After studying this chapter you will be able to Explain what limits a household’s consumption choices Describe preferences.

Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Microeconomics 7/e by Jackson and McIver Slides prepared by Muni Perumal, University of Canberra,

CONSUMER BEHAVIOR AND UTILITY MAXIMIZATION Pertemuan 17 Matakuliah: J0114-Teori Ekonomi Tahun: 2009.

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Consumer Behavior Chapter 7.

Consumer Behavior 06 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Consumer Behavior 06 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Copyright 2008 The McGraw-Hill Companies 19 Consumer Behavior and Utility Maximization Click to Link to Appendix 19: Indifference Curve Analysis.

Micro Chapter 19- Presentation 1. Law of Diminishing Marginal Utility Added satisfaction declines as a consumer acquires additional units of a given product.

The Rational Consumer. The income and substitution effects have been sacrificed… Their definitions are straight forward and in your book.

Consumer Behavior Mr. Bammel. Law of Diminishing Marginal Utility  The principle that the added satisfaction declines as a consumer acquires additional.

Consumer Behavior 06 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Consumer Behavior 06 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

4 - 1 Copyright McGraw-Hill/Irwin, 2002 The Law of Demand Law of Diminishing Marginal Utility Total and Marginal Utility Theory of Consumer Behavior Utility.

Consumer Behavior and Utility Maximization 19 C H A P T E R.

Consumer Behavior and Utility Maximization

What does the economic term “Utility” mean? Utility means “satisfaction.”

Consumer Behavior & Utility Maximization ECO 2023 Chapter 7 Fall 2007 Created by: M. Mari.

© 2012 McGraw-Hill Ryerson Limited

CONSUMER BEHAVIOR. UTILITY The satisfaction that consumption of a good or service provides.

Consumer Behavior and Utility Maximization HOW CONSUMERS MAKE CHOICES UNDER INCOME CONSTRAINTS UTILITY MAXIMIZATION.

Chapter 11: Income Inequality and Poverty Pages Consumer Behavior and Utility Maximization.

Consumer Behavior and Utility Maximization 21 C H A P T E R.

2002 Microeconomics Question 3.

7-1 Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Microeconomics 8e, by Jackson & McIver By Muni Perumal, University of Canberra, Australia Chapter.

Copyright 2011The McGraw-Hill Companies 5-1 Law of Diminishing Marginal Utility Theory of Consumer Behavior Deriving the Demand Curve Applications and.

7 Consumer Behavior and Utility Maximization

© 2005 McGraw-Hill Ryerson Ltd. 1 Microeconomics, Chapter 6 The Theory of Consumer Choice SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE.

CONSUMER BEHAVIOR. UTILITY The satisfaction that consumption of a good or service provides.

1 Chapter 6 Consumer Choice Theory ©2002 South-Western College Publishing Key Concepts Summary Practice Quiz Internet Exercises Internet Exercises.

Copyright McGraw-Hill/Irwin, 2002 The Law of Demand Law of Diminishing Marginal Utility Total and Marginal Utility Theory of Consumer Behavior.

Economics Chapter 4 Demand. What is Demand? “Demand” for a product means more than simply the desire to own it. demand includes desire and also the willingness.

Chapter 19 Consumer Behavior and Utility Maximization

Consumer Behavior: Utility Maximization

Consumer Choice: Maximizing Utility and Behavioural Economics

Consumer Behavior and Utility Maximization

Microeconomics Chapter 6 Consumer Behavior

06 Consumer Behavior Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

Consumer Behavior and Utility Maximization

6a – Consumer Decisions This web quiz may appear as two pages on tablets and laptops. I recommend that you view it as one page by clicking on the open.

Chapter 7 Utility Maximization

Consumer Behaviour and Utility Maximization

Chapter 7 Utility Maximization

Consumer Choice: Maximizing Utility and Behavioural Economics

ECO 101: Introduction to Microeconomics

06 Consumer Behavior Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

Consumer Choice: Maximizing Utility

19 Consumer Behavior and Utility Maximization

Consumer Behavior & Utility Maximization

Consumer Behavior and Utility Maximization

Consumer Choice Theory

Consumer Behavior and Utility Maximization

Utility Maximization Ch7

Consumer Behavior and Utility Maximization

Total and Marginal Utility

Consumer Behavior Ch. 7.

Consumer Choice: Maximizing Utility

Consumer Behavior and Utility Maximization

Chapter 7 Utility Maximization

DO NOW!! If you had $500, what items would you buy, and how many of each? How did you decide? Imagine you get $1000 of utility from buying an car, but.

19 Consumer Behavior and Utility Maximization

Chapter 6 Consumer Choice Theory

Consumer Behavior and Utility Maximization

06 Consumer Behavior Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

Presentation transcript:

Chapter 7 Consumer Behavior & Utility Maximization

Introduction A. NO two consumers spend their incomes in the same way. How can this be explained? B. Why does a consumer buy a particular goods rather than others? C. Water VS. Diamond (Paradox of Value) Examining these issues will help us understand consumer behavior and the law of demand.

Utility Graphically ] Total Utility 1 2 3 4 5 6 7 10 18 24 28 30 10 8 10 20 30 8 6 4 2 -2 1 3 5 7 Total Utility (Utils) Marginal Utility (Utils) (1) Tacos Consumed Per Meal (2) Total Utility, Utils (3) Marginal Utility, Utils TU 1 2 3 4 5 6 7 10 18 24 28 30 ] 10 8 6 4 2 -2 Units Consumed Per Meal Marginal Utility MU Units Consumed Per Meal 7-3

Utility = Satisfaction 1. Utility Economics = Amount of satisfaction. 2. Marginal Utility (MU) = the extra utility a consumer gets from one additional unit of a product 3- Total Utility (TU) increases at a diminishing rate since each taco adds less and less to the consumer’s satisfaction. 4. The law of diminishing marginal utility (MU) : Successive units of a product yield smaller and smaller amounts of MU. How about the law when Drug addiction comes to mind? CONSIDER THIS … Vending Machines and Marginal Utility

Theory of Consumer Behavior Marginal Utility Per Dollar/KD/Money: Consumer Equilibrium: (how consumers allocate their income) 1- 2- 7-5

Numerical Example Combinations of apples and oranges obtainable with an income of $10 (2) Apple (product A) Price = $1 (3) Orange (product B) Price = $2 (b) Marginal Utility Per Dollar (MU/Price) (a) Marginal Utility, Utils (1) Unit of Product First Second Third Fourth Fifth Sixth Seventh 10 8 7 6 5 4 3 24 20 18 16 12 10 8 7 6 5 4 3 12 9 2 Final result – at these prices, purchase 2 apples and 4 oranges 7-6

Deriving the Demand Curve Price of Product B 1 2 4 6 Quantity Demanded of B Price Per Unit of B Quantity Demanded $2 4 1 6 Income Effects Substitution Effects DB 7-7