A production function f is indirectly concave if it is a strictly increasing transformation of a concave function f. Attending lectures should therefore help you improve your understanding of the material covered in the notes. Jun 15, 2018 detailed lecture notes, reading list, and assessment materials from a 2016 undergraduate graduate course applying microeconomic theory to analysis of public policy. Consumer preference theory a notion of utility function b axioms of consumer preference c monotone transformations 2. At least one solution exists since bp,m is compact and ux is continuous by the.
According to walter consumer behaviour is the process where by individual decides what, where, when, how, from whom to purchase the goods and. Microeconomics is the study of the behavior of individual households, firms and industries as well as the supply and demand relationships between producers and consumers. Producer theory however, as happens in consumer theory, a solution for 2 requires less than concavity on f. The consumers budget constraintany point on the budget constraint line indicates the consumers combination or tradeoff between two goods. Later on, alfred marshall developed it in his book, principle of economics published in 1890. Theory of choice a solving the consumers problem ingredients characteristics of the solution interior vs corner. Buying having and being exam 9 december 2018, questions and answers exam 8 december, questions and answers exam 9 december 2018, questions and answers exam 8 december, questions and answers. An introduction to consumer theory an introduction to. In some situations, consumers do have clear and strong preferences for particular product or service characteristics.
The following definition makes explicit the properties that a function u that represent some preferences must have. We then consider two alternative ways of attaining the consumers optimum. Lecture 3 axioms of consumer preference and the theory. Reflects totality of consumers decisions with respect to the acquisition, consumption and disposition of goods, services, time and ideas by human decisionmaking units over time. Completeness, transitivity, the more the better indifference curves cannot cross eachother. Axioms of consumer preference and the theory of choice. For example, one basket may contain one hamburger, one soft drink, and a ticket to a ball game, while another. Apr 18, 2016 theory of consumer choice lecture notes economics 1. Courses at engineering lecture notes, previous year questions and solutions pdf free download electronics and communication engineering etc, engineering class handwritten notes, exam notes, previous year questions, pdf free download. Lecture 3 axioms of consumer preference and the theory of choice david autor 14. Return to contents list go to chapter 1 notes go to chapter 2 notes go to chapter 3 notes go to chapter 6 notes go to chapter 9 notes go to chapter 8 notes go to.
Calculating elasticities pdf before watching the lecture video, read the course textbook for an introduction to the material covered in this session. Lecture notes principles of microeconomics economics. Completeness, transitivity, the more the better indifference curves cannot cross eachother mrs of y for x. Microeconomics of consumer theory the two broad categories of decisionmakers in an economy are consumers and firms. Read the recitation notes, which cover new content that adds to and supplements the material covered in lecture. Theory of consumer behaviour the concept of consumer surplus was introduced by a. If he buys no pepsi, he can afford 100 pizzas point a. Consumer behaviour refers to the behaviour that consumer display in searching, purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs. With the model, we can determine whether goods are substitutes or complements, normal or inferior, and use the final effects to see how consumers respond to price changes. Detailed lecture notes, reading list, and assessment materials from a 2016 undergraduate graduate course applying microeconomic theory to analysis of public policy. For example, one basket may contain one hamburger, one soft drink, and a ticket to a ball game, while another basket may contain two soft drinks and two movie tickets. The decisions that individuals make about what and how much to consume are among the most important factors that shape the evolution of the overall.
These lecture notes were prepared by xingze wang, yinghsuan lin, and frederick jao specifically for mit opencourseware. The study of the economics is critical to success in business. For example, if the consumer buys no pizzas, he can afford 500 pints of pepsi point b. Approach must choose between two desirable alternatives theory of cognitive. Theory of choice a solving the consumer s problem ingredients characteristics of the solution interior vs corner. Contents 1 themarket4 2 budgetconstraint8 3 preferences10 4 utility 14 5 choice 18 6 demand 24 7 revealedpreference27. By a consumer we mean a person who has the opportunity to buy. We must assume that the company has adopted the marketing concept and are consumer oriented. The concept of consumer surplus is related to our daily life expenses. C the theory of consumer choice 7 the slope of the budget constraint the slope of the budget constraint equals the rate. A fundamental hypothesis in the consumer theory is that a rational consumer will choose a most preferred bundle from the set of a. Chapter 1 preface these notes are intended for the introductory.
Adrien vigier, university of oslo fall 2012 1 foreword the aim of these notes is to provide a concise introduction to microeconomic modeling at the advanced undergraduate level. Assume that there are n commodities available to the consumer, with given market prices p 1, p 2, p n. The consumer maximizes his utility by buying x and y of the two commodities. Here is the data file i used in r intro 1 in my econometrics series. Reflects totality of consumer s decisions with respect to the acquisition, consumption and disposition of goods, services, time and ideas by human decisionmaking units over time. Lecture notes consumer behaviour chapter 15 c06 solution manual consumer behavior. Consumer theory preferences and utility utility maximization the primal problem expenditure minimization the dual first we explore how consumers preferences give rise to a utility fct which describes peoples objectives. We then consider two alternative ways of attaining the consumer.
The subtopics for each lecture are related to the chapters in the textbook. So in this lesson, consumer behavior in a marketing context is indeed going to be our focus. The notes the dominant part of which are written by dl aim. Assuming small is better, a consumer may be willing to pay more for a smaller pda. Lecture note microeconomic theory 1 yonsei university. Modern economics and mathematics, individual decision making, consumer theory, production theory, choice under uncertainty, strategic behavior and markets, game theory, theory of the market, general equilibrium theory and social welfare, normative theory of equilibrium. This chapter will focus on the area of consumer behaviour by first considering a. The theory of consumer choice official portal of ukm. Lecture notes, consumer behavior textbook mkt 3230 studocu. Consumer theory finish lecture 4 consumer surplus price indexes laspeyres and paasche. For any three consumption bundles a, b and c it is valid that if consumer prefers a to b, and he prefers b to c, then he must prefer a to c. Axioms of consumer preference and the theory of choice author. The study of consumer behavior, as we will do in this lesson, is really one of the most important keys to any well executed strategic marketing plan. Consumer theory ichiro obara ucla october 8, 2012 obara ucla consumer theory october 8, 2012 1 51.
Cardinal and ordinal utility 11 cardinal utility means that an individual can measure his utility and can attach specific values of utility from consuming each quantity of a good or basket of goods. January 2018 1this lecture notes are for the purpose of my teaching and convenience of my students in class. Consumers preferences represent his attitudes toward the objects of choice. To represent them formally, we use the at least as good as binary relation %on x. Consequently, much of the structure is inherited from the required text for the course, which is currently mascolell, whinston, and greens microeconomic theory referred to as mwg in. Tech in cse, mechanical, electrical, electronics, civil available for free download in pdf format at, engineering class handwritten notes, exam notes, previous year questions, pdf free download. Smoothandconvexpreference x 1 x 2 p 2p 1 x 1 x 2 x x0 x isoptimal. Engineering notes and bput previous year questions for b. It is enough, for instance, if the production function is indirectly concave. No nal year undergraduate student in economics is expected to nd in these notes any concept or idea he is not already familiar. Economic theory introduced the concept of utility functions and indifference curves. Topics include minimum wages and employment, food stamps and consumer welfare, economics of risk and safety regulation, the value of education, and gains from international trade. Consumer s preferences represent his attitudes toward the objects of choice. You might think of a household as a consumer, but households are also producers.
Introduction to the course and consumer theory chapter 5 in your textbook introduction this is a course in microeconomics. Consumer theory mark dean lecture notes for fall 2009 introductory microeconomics brown university 1introduction in this section of the course we will examine the standard methods that economists use to model the behavior of consumers. Next, we take up the traditional approach to consumer theory, often called neoclassical consumer theory. Lecture 3 axioms of consumer preference and the theory of. Consumer theory jonathan levin and paul milgrom october 2004 1 the consumer problem consumer theory is concerned with how a rational consumer would make consumption decisions. Previous next the second unit of the course introduces you to the analysis of consumer behavior. This section provides lecture notes from the course. Each individual in each of these groups makes its decisions in order to achieve some goal a consumer seeks to maximize some measure of satisfaction from his consumption decisions while a firm seeks to maximize its profits. The global consumer behaviour and online buying behaviour consumer buying habits and perceptions of emerging nonstore choices research and applications of consumer responses to direct marketing approaches issues of privacy and ethics. Lecture notes microeconomic theory and public policy. Lecture notes for fall 2009 introductory microeconomics brown university. One of the primary goals of economics is to explain human behavior in various contexts, humans as consumer of commodities or decision maker in rms or head of families or politician holding a political of ce etc. The consumer s budget constraintany point on the budget constraint line indicates the consumer s combination or tradeoff between two goods.
Introduction the purpose of this section is to delve deeper into the roots of the demand curve, to see exactly how it results from peoples tastes, income, etc. The following definition makes explicit the properties that a function u that represent some preferences. For example, a consumer faced deciding among pdas with different sizes and different prices would trade off size with price. Pdf of econometrics lecture notes for the clrm 152k. Theory of consumer choice lecture notes economics 1. In these notes, with the exception of the theorems that assume convex preferences, all of the results remain true even when some of the goods may be indivisible. Consumer theory helps us see how individual consumers behave in a large market. Microeconomics is the study of decision making under conditions of scarce resources, and that is exactly what our focus will be in this course. Given money income and price of commodities, consumer plans spending income so as to attain the highest possible satisfaction or utility. Consumer behavior is best understood in three distinct steps. Facilitates estimation of market demand for product market demand is summation of individual demand theory.
Using vector notation, we can also write these conditions as. Introduction to indifference curves and budget lines. Microeconomic theory lecture notes on preferences, budget constraints and utility maximization key. Consumer behavior theory of consumer behavior description of how consumers allocate incomes among different goods and services to maximize their wellbeing. References bennet and kassarjian, consumer beha viour, prentice hall of india, new delhi. Finally, while in principle usable on a standalone basis, these notes are primarily designed to support lectures. In topic 3, we showed how movements along the demand curve result from changes in prices. Lecture notes from first quarter of graduate microeconomics covering the theory of choice, consumer theory, producer theory and general equilibrum, plus some background mathematics. Online text and notes in advanced microeconomics the. Given the market prices and his income, the consumer aims at the maximization of his utility. Engineering notes handwritten class notes old year exam. The lecture notes are from one of the discussion sections for the course. Understanding consumer buying behavior offers consumers greater satisfaction utility.
Ordinal utility ranks utility received from consuming different amounts of goods or baskets of goods. Hauser in a classic paper on the managerial significance of behavioral decision theory, itamar simonson 1993, p. Introduction california state university, northridge. Note that the tu rises by smaller and smaller amounts the shaded areas and. This document contains a set of partial lecture notes that are intended to serve as a starting point when coming to class, so every student can complement them with additional examples, exercises and applications discussed in class. Lecture notes consumer behaviour chapter 15 mktg 406. Buying and selling endowments net demand slutsky equation labro supply opict 2.
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