Lecture Basic microeconomics - Chapter 8 Appendix "Describing consumer preferences using indifference curves" includes contents: Income expansion path, engel curves, price expansion path, income and substitution effects.
Income expansion path -IEP- traces all the best (utility-maximizing) choices a consumer makes as income changes.
The IEP slopes up if a good is a normal good
The IEP is downward sloping if a good is inferior
An Engel curve plots all the best choices a consumer makes against INCOME.
It is an income-quantity relationship
If an Engel curve is upward sloping, a good is normal; downward sloping indicates an inferior good.
After completing this chapter, students will be able to: See how a budget constraint represents the choices a consumer can afford, learn how indifference curves can be used to represent a consumer’s preferences, analyze how a consumer’s optimal choices are determined,...
Chapter 7A - Indifference curve analysis. This appendix introduces the indifference curve model of consumer behavior for those who desire a more rigorous explanation of consumer choice. Indifference curve analysis is used to derive an individual’s demand curve for a product.
A basic assumption about consumers in microeconomics is that they have preferences over different baskets of goods. Explain the concepts “preference”, “preference order”, and “basketof goods”. Exercise 1.1.2 a)If there are only two goods, it is possible to illustrate a consumer’s preferences over them with an indifference map. Draw an indifference map with three indifference curves. b)There are a few standard assumptions about what an indifference map can and cannot look like. Which are these assumptions, and what reasoning lies behind them?...
1. A. “Demand and Consumer Choice”, including addendum “Consumer Choice and Indifference Curves”
The candidate should be able to:
a. explain consumer choice in an economic framework;
Principles behind Consumer Choice
i) Limited income versus unlimited desires necessitates choices.
ii) Consumers make rational choices to achieve their goals.
iii) Consumers can substitute between “like” goods.
iv) Consumers make decisions based on less than perfect information.
Chapter 11 explain what is meant by tax efficiency, compare the excess burden of different taxes using indifference curves, determine the magnitude of excess burden using the consumer surplus concept, explain the meaning of administrative efficiency and how it can be achieved, show what is meant by tax evasion and how to reduce it, define tax flexibility.
Chapter 5 provides knowledge of theory of consumer behavior. In this chapter, you learned to: Explain the concept of utility and the basic assumptions underlying consumer preferences; explain the equilibrium condition for an individual consumer to be maximizing utility subject to a budget constraint; use indifference curves to derive a demand curve for an individual consumer;...
Chapter 5 - Theory of consumer behavior. In this chapter, you learned to: Explain the concept of utility and the basic assumptions underlying consumer preferences; explain the equilibrium condition for an individual consumer to be maximizing utility subject to a budget constraint; use indifference curves to derive a demand curve for an individual consumer;...
After completing this chapter, students will be able to: Relate how behavioral economics and prospect theory shed light on many consumer behaviors; relate how the indifference curve model of consumer behavior derives demand curves from budget lines, indifference curves, and utility maximization.