Chapter Four. Utility Functions. Utility Functions. Utility Functions. Utility
|
|
- Derrick Cobb
- 5 years ago
- Views:
Transcription
1 Functions Chapter Four A preference relation that is complete, reflexive, transitive and continuous can be represented by a continuous utility function. Continuity means that small changes to a consumption bundle cause only small changes to the preference level. 1 2 Functions A utility function U(x) represents a preference relation if and only if: x x U(x ) > U(x ) p p f ~ x x U(x ) < U(x ) Functions is an ordinal (i.e. ordering) concept. E.g. if U(x) = 6 and U(y) = 2 then bundle x is strictly preferred to bundle y. But x is not preferred three times as much as is y. x x U(x ) = U(x ). 3 4
2 Consider the bundles (4,1), (2,3) and (2,2). Suppose (2,3) (4,1) (2,2). Assign to these bundles any numbers that preserve the preference ordering; e.g. U(2,3) = 6 > U(4,1) = U(2,2) = 4. Call these numbers utility levels. p An indifference curve contains equally preferred bundles. Equal preference same utility level. Therefore, all bundles in an indifference curve have the same utility level. 5 6 So the bundles (4,1) and (2,2) are in the indiff. curve with utility level U 4 But the bundle (2,3) is in the indiff. curve with utility level U 6. On an indifference curve diagram, this preference information looks as follows: (2,3) (2,2) (4,1) p U 6 U 4 7 8
3 Another way to visualize this same information is to plot the utility level on a vertical axis. 3D plot of consumption & utility levels for 3 bundles U(2,3) = 6 U(2,2) = 4 U(4,1) = This 3D visualization of preferences can be made more informative by adding into it the two indifference curves. U 6 11 U 4 Higher indifference curves contain more preferred bundles. 12
4 As before, this can be visualized in 3D by plotting each indifference curve at the height of its utility index. U 6 U 4 U U 6 U 5 U 4 U 3 U 2 U 1 15 Comparing all possible consumption bundles gives the complete collection of the consumer s indifference curves, each with its assigned utility level. This complete collection of indifference curves completely represents the consumer s preferences. 16
5 17 26 The collection of all indifference curves for a given preference relation is an indifference map. An indifference map is equivalent to a utility function; each is the other
6 Functions Are Not Unique There is no unique utility function representation of a preference relation. if u(, ) is a utility function that represents some preferences, and f( ) is any increasing function, then f(u(, )) represents the same preferences Functions If U is a utility function that represents a preference relation and f ~ f is a strictly increasing function, then V = f(u) is also a utility function representing. f ~ (Positive) monotonic transformation Examples Cardinal p 36 Attach a significance to the magnitude The size of the utility difference between two bundles of goods has significance How do we tell you prefer one bundle twice as much as another? Willing to pay Willing to run Willing to wait 42
7 Constructing a Function Goods, Bads and Neutrals A good is a commodity unit which increases utility (gives a more preferred bundle). A bad is a commodity unit which decreases utility (gives a less preferred bundle). A neutral is a commodity unit which does not change utility (gives an equally preferred bundle) Goods, Bads and Neutrals Perfect Substitutes Units of water are goods function Units of water are bads Instead of U(, ) = consider V(, ) = +. What do the indifference curves for this perfect substitution utility function look like? x Water Around x units, a little extra water is a neutral
8 Perfect Substitution Indifference Curves + = = 9 + = 13 V(, ) = All are linear and parallel. 49 Perfect Complements Instead of U(, ) = or V(, ) = +, consider W(, ) = min{, }. What do the indifference curves for this perfect complementarity utility function look like? 50 Perfect Complementarity Indifference Curves 45 o W(, ) = min{, } Quasi-Linear Indifference Curves A utility function of the form U(, ) = f( ) min{, } = 8 min{, } = 5 min{, } = 3 is linear in just and is called quasilinear. E.g. U(, ) = 2x 1/ All are right-angled with vertices on a ray 53 from the origin. 54
9 Quasi-linear Indifference Curves Each curve is a vertically shifted copy of the others. Some Other Functions and Their Indifference Curves Any utility function of the form U(, ) = a x2 b with a > 0 and b > 0 is called a Cobb- Douglas utility function. E.g. U(, ) = x 1/2 1 x 1/2 2 (a = b = 1/2) V(, ) = x 3 2 (a = 1, b = 3) Cobb-Douglas Indifference Curves All curves are hyperbolic, asymptoting to, but never touching any axis. Marginal Utilities Marginal means incremental. The marginal utility of commodity i is the rate-of-change of total utility as the quantity of commodity i consumed changes; i.e. MU i U = x i 57 58
10 Marginal Utilities and Marginal Rates-of-Substitution The general equation for an indifference curve is U(, ) k, a constant. Totally differentiating this identity gives d x2 dx1 U x = / 1. U / x2 Monotonic Transformations & Marginal Rates-of-Substitution Applying a monotonic transformation to a utility function representing a preference relation simply creates another utility function representing the same preference relation. What happens to marginal rates-ofsubstitution when a monotonic transformation is applied? Monotonic Transformations & Marginal Rates-of-Substitution For U(, ) = the MRS = - /. Create V = U 2 ; i.e. V(, ) = 2 2. What is the MRS for V? Ex. MU & MRS; Cobb-Douglas Suppose U(, ) =. Then 64 67
11 Ex. MU & MRS; Cobb-Douglas U(, ) = ; MRS x = 2 x1 Ex. MU & MRS; Quasi-linear Functions A quasi-linear utility function is of the form U(, ) = f( ) MRS(1,8) = - 8/1 = -8 MRS(6,6) = - 6/6 = -1. U = U = Ex. MU & MRS; Quasi-linear Functions MRS = - f ( ) does not depend upon so the slope of indifference curves for a quasi-linear utility function is constant along any line for which is constant. What does that make the indifference map for a quasi-linear utility function look like? Ex. MU & MRS; Quasi-linear Functions MRS = - f( ) MRS = -f( ) Each curve is a vertically shifted copy of the others. MRS is a constant along any line for which is constant
Preferences - A Reminder
Chapter 4 Utility Preferences - A Reminder x y: x is preferred strictly to y. p x ~ y: x and y are equally preferred. f ~ x y: x is preferred at least as much as is y. Preferences - A Reminder Completeness:
Summer 2016 Microeconomics 2 ECON1201. Nicole Liu Z
Summer 2016 Microeconomics 2 ECON1201 Nicole Liu Z3463730 BUDGET CONSTAINT THE BUDGET CONSTRAINT Consumption Bundle (x 1, x 2 ): A list of two numbers that tells us how much the consumer is choosing of
Microeconomic Analysis ECON203
Microeconomic Analysis ECON203 Consumer Preferences and the Concept of Utility Consumer Preferences Consumer Preferences portray how consumers would compare the desirability any two combinations or allotments
Mathematical Economics dr Wioletta Nowak. Lecture 2
Mathematical Economics dr Wioletta Nowak Lecture 2 The Utility Function, Examples of Utility Functions: Normal Good, Perfect Substitutes, Perfect Complements, The Quasilinear and Homothetic Utility Functions,
Choice. A. Optimal choice 1. move along the budget line until preferred set doesn t cross the budget set. Figure 5.1.
Choice 34 Choice A. Optimal choice 1. move along the budget line until preferred set doesn t cross the budget set. Figure 5.1. Optimal choice x* 2 x* x 1 1 Figure 5.1 2. note that tangency occurs at optimal
3. Consumer Behavior
3. Consumer Behavior References: Pindyck und Rubinfeld, Chapter 3 Varian, Chapter 2, 3, 4 25.04.2017 Prof. Dr. Kerstin Schneider Chair of Public Economics and Business Taxation Microeconomics Chapter 3
PAPER NO.1 : MICROECONOMICS ANALYSIS MODULE NO.6 : INDIFFERENCE CURVES
Subject Paper No and Title Module No and Title Module Tag 1: Microeconomics Analysis 6: Indifference Curves BSE_P1_M6 PAPER NO.1 : MICRO ANALYSIS TABLE OF CONTENTS 1. Learning Outcomes 2. Introduction
Chapter 3. A Consumer s Constrained Choice
Chapter 3 A Consumer s Constrained Choice If this is coffee, please bring me some tea; but if this is tea, please bring me some coffee. Abraham Lincoln Chapter 3 Outline 3.1 Preferences 3.2 Utility 3.3
Preferences. Rationality in Economics. Indifference Curves
Preferences Rationality in Economics Behavioral Postulate: A decisionmaker always chooses its most preferred alternative from its set of available alternatives. So to model choice we must model decisionmakers
Chapter 3: Model of Consumer Behavior
CHAPTER 3 CONSUMER THEORY Chapter 3: Model of Consumer Behavior Premises of the model: 1.Individual tastes or preferences determine the amount of pleasure people derive from the goods and services they
Properties of Demand Functions. Chapter Six. Own-Price Changes Fixed p 2 and y. Own-Price Changes. Demand
Properties of Demand Functions Chapter Six Demand Comparative statics analsis of ordinar demand functions -- the stud of how ordinar demands (,p 2,) and (,p 2,) change as prices, p 2 and income change.
Lecture 1: The market and consumer theory. Intermediate microeconomics Jonas Vlachos Stockholms universitet
Lecture 1: The market and consumer theory Intermediate microeconomics Jonas Vlachos Stockholms universitet 1 The market Demand Supply Equilibrium Comparative statics Elasticities 2 Demand Demand function.
Microeconomics Pre-sessional September Sotiris Georganas Economics Department City University London
Microeconomics Pre-sessional September 2016 Sotiris Georganas Economics Department City University London Organisation of the Microeconomics Pre-sessional o Introduction 10:00-10:30 o Demand and Supply
Mathematical Economics Dr Wioletta Nowak, room 205 C
Mathematical Economics Dr Wioletta Nowak, room 205 C Monday 11.15 am 1.15 pm wnowak@prawo.uni.wroc.pl http://prawo.uni.wroc.pl/user/12141/students-resources Syllabus Mathematical Theory of Demand Utility
Chapter 3. Consumer Behavior
Chapter 3 Consumer Behavior Question: Mary goes to the movies eight times a month and seldom goes to a bar. Tom goes to the movies once a month and goes to a bar fifteen times a month. What determine consumers
Preferences W. W. Norton & Company, Inc.
Preferences 2010 W. W. Norton & Company, Inc. Rationality in Economics Behavioral Postulate: A decisionmaker always chooses its most preferred alternative from its set of available alternatives. So to
Overview Definitions Mathematical Properties Properties of Economic Functions Exam Tips. Midterm 1 Review. ECON 100A - Fall Vincent Leah-Martin
ECON 100A - Fall 2013 1 UCSD October 20, 2013 1 vleahmar@uscd.edu Preferences We started with a bundle of commodities: (x 1, x 2, x 3,...) (apples, bannanas, beer,...) Preferences We started with a bundle
Graphs Details Math Examples Using data Tax example. Decision. Intermediate Micro. Lecture 5. Chapter 5 of Varian
Decision Intermediate Micro Lecture 5 Chapter 5 of Varian Decision-making Now have tools to model decision-making Set of options At-least-as-good sets Mathematical tools to calculate exact answer Problem
Intro to Economic analysis
Intro to Economic analysis Alberto Bisin - NYU 1 The Consumer Problem Consider an agent choosing her consumption of goods 1 and 2 for a given budget. This is the workhorse of microeconomic theory. (Notice
File: ch03, Chapter 3: Consumer Preferences and The Concept of Utility
for Microeconomics, 5th Edition by David Besanko, Ronald Braeutigam Completed download: https://testbankreal.com/download/microeconomics-5th-edition-test-bankbesanko-braeutigam/ File: ch03, Chapter 3:
We want to solve for the optimal bundle (a combination of goods) that a rational consumer will purchase.
Chapter 3 page1 Chapter 3 page2 The budget constraint and the Feasible set What causes changes in the Budget constraint? Consumer Preferences The utility function Lagrange Multipliers Indifference Curves
Chapter 3 PREFERENCES AND UTILITY. Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved.
Chapter 3 PREFERENCES AND UTILITY Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved. 1 Axioms of Rational Choice ( 理性选择公理 ) Completeness ( 完备性 ) if A and B are any two
Mathematical Economics dr Wioletta Nowak. Lecture 1
Mathematical Economics dr Wioletta Nowak Lecture 1 Syllabus Mathematical Theory of Demand Utility Maximization Problem Expenditure Minimization Problem Mathematical Theory of Production Profit Maximization
Consumer Theory. June 30, 2013
Consumer Theory Ilhyun Cho, ihcho@ucdavis.edu June 30, 2013 The main topic of consumer theory is how a consumer choose best consumption bundle of goods given her income and market prices for the goods,
Choice. A. Optimal choice 1. move along the budget line until preferred set doesn t cross the budget set. Figure 5.1.
Choice 2 Choice A. choice. move along the budget line until preferred set doesn t cross the budget set. Figure 5.. choice * 2 * Figure 5. 2. note that tangency occurs at optimal point necessary condition
CONSUMPTION THEORY - first part (Varian, chapters 2-7)
QUESTIONS for written exam in microeconomics. Only one answer is correct. CONSUMPTION THEORY - first part (Varian, chapters 2-7) 1. Antonio buys only two goods, cigarettes and bananas. The cost of 1 packet
ECONOMICS SOLUTION BOOK 2ND PUC. Unit 2
ECONOMICS SOLUTION BOOK N PUC Unit I. Choose the correct answer (each question carries mark). Utility is a) Objective b) Subjective c) Both a & b d) None of the above. The shape of an indifference curve
CLAS. Utility Functions Handout
Utility Functions Handout Intro: A big chunk of this class revolves around utility functions. Bottom line, utility functions tell us how we prefer to consume goods (and later how we want to produce) so
Econ 4601 Urban & Regional Economics. Lecture 4: Utility. Instructor: Hiroki Watanabe. Summer 2010
Econ 601 Urban & Regional Economics Lecture : Utility Instructor: Hiroki Watanabe Summer 0 1 / 1 1 Introduction Utility Function Utility Function Ordinal Property Indifference Curves 3 Examples Perfect
Lecture 7. The consumer s problem(s) Randall Romero Aguilar, PhD I Semestre 2018 Last updated: April 28, 2018
Lecture 7 The consumer s problem(s) Randall Romero Aguilar, PhD I Semestre 2018 Last updated: April 28, 2018 Universidad de Costa Rica EC3201 - Teoría Macroeconómica 2 Table of contents 1. Introducing
MICROECONOMIC THEORY 1
MICROECONOMIC THEORY 1 Lecture 2: Ordinal Utility Approach To Demand Theory Lecturer: Dr. Priscilla T Baffour; ptbaffour@ug.edu.gh 2017/18 Priscilla T. Baffour (PhD) Microeconomics 1 1 Content Assumptions
Understand general-equilibrium relationships, such as the relationship between barriers to trade, and the domestic distribution of income.
Review of Production Theory: Chapter 2 1 Why? Understand the determinants of what goods and services a country produces efficiently and which inefficiently. Understand how the processes of a market economy
Midterm 1 (A) U(x 1, x 2 ) = (x 1 ) 4 (x 2 ) 2
Econ Intermediate Microeconomics Prof. Marek Weretka Midterm (A) You have 7 minutes to complete the exam. The midterm consists of questions (5+++5= points) Problem (5p) (Well-behaved preferences) Martha
Notation and assumptions Graphing preferences Properties/Assumptions MRS. Preferences. Intermediate Micro. Lecture 3. Chapter 3 of Varian
Preferences Intermediate Micro Lecture 3 Chapter 3 of Varian The central question of economics Microeconomics: study of decision-making under scarcity Scarcity: last topic Decision-making: next 3 topics
University of Toronto Department of Economics ECO 204 Summer 2013 Ajaz Hussain TEST 1 SOLUTIONS GOOD LUCK!
University of Toronto Department of Economics ECO 204 Summer 2013 Ajaz Hussain TEST 1 SOLUTIONS TIME: 1 HOUR AND 50 MINUTES DO NOT HAVE A CELL PHONE ON YOUR DESK OR ON YOUR PERSON. ONLY AID ALLOWED: A
We will make several assumptions about these preferences:
Lecture 5 Consumer Behavior PREFERENCES The Digital Economist In taking a closer at market behavior, we need to examine the underlying motivations and constraints affecting the consumer (or households).
What is the marginal utility of the third chocolate bar to this consumer? a) 10 b) 9 c) 8 d) 7
Chapter 5 Review Quiz 1. Which of the following best expresses the law of diminishing marginal utility? a) the more a person consumes of a product, the smaller becomes the utility received from its consumption
Advanced Microeconomics
Consumer theory: preferences, utility, budgets September 30, 2014 The plan: 1 Some (very basic) denitions 2 (most general) 3 Utility function 4 The choice set The decision problem faced by the consumer
Possibilities, Preferences, and Choices
9 Possibilities, Preferences, and Choices Learning Objectives Household s budget line and show how it changes when prices or income change Use indifference curves to map preferences and explain the principle
Johanna has 10 to spend, the price of an apple is 1 and the price of a banana is 2. What are her options?
Budget Constraint 1 Example 1 Johanna has 10 to spend, the price of an apple is 1 and the price of a banana is 2. What are her options? Should she buy only apples? Should she spend all her money? How many
(0, 1) (1, 0) (3, 5) (4, 2) (3, 10) (4, 8) (8, 3) (16, 6)
1. Consider a person whose preferences are represented by the utility function u(x, y) = xy. a. For each pair of bundles A and B, indicate whether A is preferred to B, B is preferred to A, or A is indifferent
Consumer Theory. Introduction Budget Set/line Study of Preferences Maximizing Utility
Consumer Theory Introduction Budget Set/line Study of Preferences Maximizing Utility Introduction Where does the law of demand come from? Consumption choices depend on two factors: 1. What choices you
Preferences and Utility
Preferences and Utility PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 Axioms of Rational Choice Completeness If A and B are any two situations, an individual can always
Chapter 4. Consumer and Firm Behavior: The Work-Leisure Decision and Profit Maximization
Chapter 4 Consumer and Firm Behavior: The Work-Leisure Decision and Profit Maximization The Representative Consumer Preferences Goods: The Consumption Good and Leisure The Utility Function More Preferred
Chapter Three. Preferences. Preferences. A decisionmaker always chooses its most preferred alternative from its set of available alternatives.
Chapter Three Preferences 1 Preferences Behavioral Postulate: A decisionmaker always chooses its most preferred alternative from its set of available alternatives. So to model choice we must model decisionmakers
Practice Problems: First-Year M. Phil Microeconomics, Consumer and Producer Theory Vincent P. Crawford, University of Oxford Michaelmas Term 2010
Practice Problems: First-Year M. Phil Microeconomics, Consumer and Producer Theory Vincent P. Crawford, University of Oxford Michaelmas Term 2010 Problems from Mas-Colell, Whinston, and Green, Microeconomic
Review of Previous Lectures
Review of Previous Lectures 1 Main idea Main question Indifference curves How do consumers make choices? Focus on preferences Understand preferences Key concept: MRS Utility function The slope of the indifference
Eco 300 Intermediate Micro
Eco 300 Intermediate Micro Instructor: Amalia Jerison Office Hours: T 12:00-1:00, Th 12:00-1:00, and by appointment BA 127A, aj4575@albany.edu A. Jerison (BA 127A) Eco 300 Spring 2010 1 / 27 Review of
The supply function is Q S (P)=. 10 points
MID-TERM I ECON500, :00 (WHITE) October, Name: E-mail: @uiuc.edu All questions must be answered on this test form! For each question you must show your work and (or) provide a clear argument. All graphs
Midterm 1 - Solutions
Ecn 100 - Intermediate Microeconomic Theory University of California - Davis October 16, 2009 Instructor: John Parman Midterm 1 - Solutions You have until 11:50am to complete this exam. Be certain to put
Consider the production function f(x 1, x 2 ) = x 1/2. 1 x 3/4
In this chapter you work with production functions, relating output of a firm to the inputs it uses. This theory will look familiar to you, because it closely parallels the theory of utility functions.
Theoretical Tools of Public Finance. 131 Undergraduate Public Economics Emmanuel Saez UC Berkeley
Theoretical Tools of Public Finance 131 Undergraduate Public Economics Emmanuel Saez UC Berkeley 1 THEORETICAL AND EMPIRICAL TOOLS Theoretical tools: The set of tools designed to understand the mechanics
Lecture 4: Consumer Choice
Lecture 4: Consumer Choice September 18, 2018 Overview Course Administration Ripped from the Headlines Consumer Preferences and Utility Indifference Curves Income and the Budget Constraint Making a Choice
Econ 323 Microeconomic Theory. Practice Exam 1 with Solutions
Econ 323 Microeconomic Theory Practice Exam 1 with Solutions Chapter 2, Question 1 The equilibrium price in a market is the price where: a. supply equals demand b. no surpluses or shortages result c. no
Econ 323 Microeconomic Theory. Chapter 2, Question 1
Econ 323 Microeconomic Theory Practice Exam 1 with Solutions Chapter 2, Question 1 The equilibrium price in a market is the price where: a. supply equals demand b. no surpluses or shortages result c. no
Homework 3 Solutions
Homework 3 Solutions Econ 5 - Stanford Universit - Winter Quarter 215/16 Exercise 1: Math Warmup: The Canonical Optimization Problems (Lecture 6) For each of the following five canonical utilit functions,
Solutions to Assignment #2
ECON 20 (Fall 207) Department of Economics, SFU Prof. Christoph Lülfesmann exam). Solutions to Assignment #2 (My suggested solutions are usually more detailed than required in an I. Short Problems. The
Midterm 1 - Solutions
Ecn 100 - Intermediate Microeconomics University of California - Davis April 15, 2011 Instructor: John Parman Midterm 1 - Solutions You have until 11:50am to complete this exam. Be certain to put your
Macroeconomics for Development Week 3 Class
MSc in Economics for Development Macroeconomics for Development Week 3 Class Sam Wills Department of Economics, University of Oxford samuel.wills@economics.ox.ac.uk Consultation hours: Friday, 2-3pm, Weeks
Ecn Intermediate Microeconomic Theory University of California - Davis October 16, 2008 Professor John Parman. Midterm 1
Ecn 100 - Intermediate Microeconomic Theory University of California - Davis October 16, 2008 Professor John Parman Midterm 1 You have until 6pm to complete the exam, be certain to use your time wisely.
If Tom's utility function is given by U(F, S) = FS, graph the indifference curves that correspond to 1, 2, 3, and 4 utils, respectively.
CHAPTER 3 APPENDIX THE UTILITY FUNCTION APPROACH TO THE CONSUMER BUDGETING PROBLEM The Utility-Function Approach to Consumer Choice Finding the highest attainable indifference curve on a budget constraint
ECS2601 Oct / Nov 2014 Examination Memorandum. (1a) Raymond has a budget of R200. The price of food is R20 and the price of clothes is R50.
ECS2601 Oct / Nov 201 Examination Memorandum (1a) Raymond has a budget of R200. The price of food is R20 and the price of clothes is R50. (i) Draw a budget line, with food on the horizontal axis. (2) Clothes
Microeconomics. The Theory of Consumer Choice. N. Gregory Mankiw. Premium PowerPoint Slides by Ron Cronovich update C H A P T E R
C H A P T E R 21 The Theory of Consumer Choice Microeconomics P R I N C I P L E S O F N. Gregory Mankiw Premium PowerPoint Slides by Ron Cronovich 2010 South-Western, a part of Cengage Learning, all rights
Theory of Consumer Behavior First, we need to define the agents' goals and limitations (if any) in their ability to achieve those goals.
Theory of Consumer Behavior First, we need to define the agents' goals and limitations (if any) in their ability to achieve those goals. We will deal with a particular set of assumptions, but we can modify
PRACTICE QUESTIONS CHAPTER 5
CECN 104 PRACTICE QUESTIONS CHAPTER 5 1. Marginal utility is the: A. sensitivity of consumer purchases of a good to changes in the price of that good. B. change in total utility realized by consuming one
Lecture 3: Consumer Choice
Lecture 3: Consumer Choice September 15, 2015 Overview Course Administration Ripped from the Headlines Quantity Regulations Consumer Preferences and Utility Indifference Curves Income and the Budget Constraint
ECON 103C -- Final Exam Peter Bell, 2014
Name: Date: 1. Which of the following factors causes a movement along the demand curve? A) change in the price of related goods B) change in the price of the good C) change in the population D) both b
Consumer preferences and utility. Modelling consumer preferences
Consumer preferences and utility Modelling consumer preferences Consumer preferences and utility How can we possibly model the decision of consumers? What will they consume? How much of each good? Actually,
Econ 101A Midterm 1 Th 28 February 2008.
Econ 0A Midterm Th 28 February 2008. You have approximately hour and 20 minutes to answer the questions in the midterm. Dan and Mariana will collect the exams at.00 sharp. Show your work, and good luck!
not to be republished NCERT Chapter 2 Consumer Behaviour 2.1 THE CONSUMER S BUDGET
Chapter 2 Theory y of Consumer Behaviour In this chapter, we will study the behaviour of an individual consumer in a market for final goods. The consumer has to decide on how much of each of the different
MIDTERM EXAM DRAFT ANSWER KEY
MIDTERM EXAM DRAFT ANSWER KEY ECON 210 PROFESSOR GUSE Instructions. You have 2 hours to complete the exam. There are a total of 60 points on the exam. The exam is designed to take about 1 minute per point.
Introduction to economics for PhD Students of The Institute of Physical Chemistry, PAS Lecture 3 Consumer s choice
Introduction to economics for PhD Students of The Institute of Physical Chemistry, PAS Lecture 3 Consumer s choice Dr hab. Gabriela Grotkowska, University of Warsaw Based on: Mankiw G., Taylor R, Economics,
Appendix 1: The theory of consumer s behavior. preference, utility, indifference curve, budget constraint, optimal consumption plan, demand curve
Appendi: The theory of consumer s behavior preference, utility, indifference curve, budget constraint, optimal consumption plan, demand curve 1 1. Preference ordering and utility function! Objects to be
Problem Set 1 Answer Key. I. Short Problems 1. Check whether the following three functions represent the same underlying preferences
Problem Set Answer Key I. Short Problems. Check whether the following three functions represent the same underlying preferences u (q ; q ) = q = + q = u (q ; q ) = q + q u (q ; q ) = ln q + ln q All three
Problem Set 2. Theory of Banking - Academic Year Maria Bachelet March 2, 2017
Problem Set Theory of Banking - Academic Year 06-7 Maria Bachelet maria.jua.bachelet@gmai.com March, 07 Exercise Consider an agency relationship in which the principal contracts the agent, whose effort
14.54 International Trade Lecture 3: Preferences and Demand
14.54 International Trade Lecture 3: Preferences and Demand 14.54 Week 2 Fall 2016 14.54 (Week 2) Preferences and Demand Fall 2016 1 / 29 Today s Plan 1 2 Utility maximization 1 2 3 4 Budget set Preferences
AS/ECON 4070 AF Answers to Assignment 1 October 2001
AS/ECON 4070 AF Answers to Assignment 1 October 2001 1. Yes, the allocation will be efficient, since the tax in this question is a tax on the value of people s endowments. This is a lump sum tax. In an
(Note: Please label your diagram clearly.) Answer: Denote by Q p and Q m the quantity of pizzas and movies respectively.
1. Suppose the consumer has a utility function U(Q x, Q y ) = Q x Q y, where Q x and Q y are the quantity of good x and quantity of good y respectively. Assume his income is I and the prices of the two
Faculty: Sunil Kumar
Objective of the Session To know about utility To know about indifference curve To know about consumer s surplus Choice and Utility Theory There is difference between preference and choice The consumers
CPT Section C General Economics Unit 2 Ms. Anita Sharma
CPT Section C General Economics Unit 2 Ms. Anita Sharma Demand for a commodity depends on the utility of that commodity to a consumer. PROBLEM OF CHOICE RESOURCES (Limited) WANTS (Unlimited) Problem
myepathshala.com (For Crash Course & Revision)
Chapter 2 Consumer s Equilibrium Who is Consumer A consumer is one who buys goods and services for satisfaction of wants. What is Equilibrium An equilibrium is a point of state or point of rest which every
p 1 _ x 1 (p 1 _, p 2, I ) x 1 X 1 X 2
Today we will cover some basic concepts that we touched on last week in a more quantitative manner. will start with the basic concepts then give specific mathematical examples of the concepts. f time permits
a. Show the budget set containing all of the commodity bundles that the following individuals can afford.
Chapter. To buy a commodity one has to pay with money and a certain amount of ration cards. Suppose that we have two commodities A and B. The price on each commodity is krona, but in order to buy A you
Chapter 4. Consumer and Firm Behavior: The Work- Leisure Decision and Profit Maximization. Copyright 2014 Pearson Education, Inc.
Chapter 4 Consumer and Firm Behavior: The Work- Leisure Decision and Profit Maximization Copyright Chapter 4 Topics Behavior of the representative consumer Behavior of the representative firm 1-2 Representative
c U 2 U 1 Econ 310 Practice Questions: Chaps. 4, 7-8 Figure 4.1 Other goods
Econ 310 Practice Questions: Chaps. 4, 7-8 Figure 4.1 Other goods A H a c U 2 b U 1 0 x Z H Z 1. Figure 4.1 shows the effect of a decrease in the price of good x. The substitution effect is indicated by
Chapter 6: Supply and Demand with Income in the Form of Endowments
Chapter 6: Supply and Demand with Income in the Form of Endowments 6.1: Introduction This chapter and the next contain almost identical analyses concerning the supply and demand implied by different kinds
Lecture 03 Consumer Preference Theory
Lecture 03 Consumer reference Theor 1. Consumer preferences will tell us how an individual would rank (i.e. compare the desirabilit of) an two consumption bundles (or baskets), assuming the bundles were
Problem Set 5 Answers. A grocery shop is owned by Mr. Moore and has the following statement of revenues and costs:
1. Ch 7, Problem 7.2 Problem Set 5 Answers A grocery shop is owned by Mr. Moore and has the following statement of revenues and costs: Revenues $250,000 Supplies $25,000 Electricity $6,000 Employee salaries
ANSWER KEY 3 UTILITY FUNCTIONS, THE CONSUMER S PROBLEM, DEMAND CURVES. u(c,s) = 3c+2s
ANSWER KEY 3 UTILITY FUNCTIONS, THE CONSUMER S PROBLEM, DEMAND CURVES ECON 210 GUSE REVISED OCT 3, 2017 (1) Perfect Substitutes. Suppose that Jack s utility is entirely based on number of hours spent camping
ECO402 Microeconomics Spring 2009 Marks: 20
Microeconomics Marks: 20 NOTE: READ AND STRICTLY FOLLOW ALL THESE INSTRUCTIONS BEFORE ATTEMPTING THE QUIZ. INSTRUCTIONS This quiz covers Lesson # 01-10. Do not use red color in your quiz. It is used only
2- Demand and Engel Curves derive from consumer optimal choice problem: = PL
Correction opics -he values of the utility function have no meaning. he only relevant property is how it orders the bundles. Utility is an ordinal measure rather than a cardinal one. herefore any positive
Introductory to Microeconomic Theory [08/29/12] Karen Tsai
Introductory to Microeconomic Theory [08/29/12] Karen Tsai What is microeconomics? Study of: Choice behavior of individual agents Key assumption: agents have well-defined objectives and limited resources
Topic 4b Competitive consumer
Competitive consumer About your economic situation, do you see the light at the end of the tunnel? I think the light at the end of the tunnel has been turned off due to my budget constraints. 1 of 25 The
A b. Marginal Utility (measured in money terms) is the maximum amount of money that a consumer is willing to pay for one more unit of a good (X).
Week 2. Consumer Choice: Demand Side of the Market 1. What is Utility? a. Total Utility (measured in money terms) is the maximum amount of money that a consumer is willing to give in exchange for a quantity
Microeconomics, IB and IBP. Regular EXAM, December 2011 Open book, 4 hours
Microeconomics, IB and IBP Regular EXAM, December 2011 Open book, 4 hours There are two pages in this exam. In total, there are six questions in the exam. The questions are organized into four sections.
1. Consider the figure with the following two budget constraints, BC1 and BC2.
Short Questions 1. Consider the figure with the following two budget constraints, BC1 and BC2. Consider next the following possibilities: A. Price of X increases and income of the consumer also increases.
Utility Maximization and Choice
Utility Maximization and Choice PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 Utility Maximization and Choice Complaints about the Economic Approach Do individuals make
Marginal Utility, Utils Total Utility, Utils
Mr Sydney Armstrong ECN 1100 Introduction to Microeconomics Lecture Note (5) Consumer Behaviour Evidence indicated that consumers can fulfill specific wants with succeeding units of a commodity but that
POSSIBILITIES, PREFERENCES, AND CHOICES
9 POSSIBILITIES, PREFERENCES, AND CHOICES You buy your music online and play it on an ipod. As the prices of a music download and an ipod have tumbled, the volume of downloads and sales of ipods have
MODULE No. : 9 : Ordinal Utility Approach
Subject Paper No and Title Module No and Title Module Tag 2 :Managerial Economics 9 : Ordinal Utility Approach COM_P2_M9 TABLE OF CONTENTS 1. Learning Outcomes: Ordinal Utility approach 2. Introduction: