Chapter 10 The Rational Consumer
Econ 101: Principles of Microeconomics
Ch. 10: The Rational Consumer
Fall 2010
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
1 / 28
Outline
1
Utility: Getting Satisfaction
2
Budgets and Optimal Consumption
3
The Optimal Consumption Choice
4
Spending the Marginal Dollar
5
From Utility to the Demand Curve
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
2 / 28
The Rational Consumer
One of the key assumptions underlying economics is the concept of the rational consumer
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
3 / 28
The Rational Consumer
One of the key assumptions underlying economics is the concept of the rational consumer ; i.e., that individuals know what they want and seek to make the most of the available opportunities given the scarcity constraints they face.
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
3 / 28
The Rational Consumer
One of the key assumptions underlying economics is the concept of the rational consumer ; i.e., that individuals know what they want and seek to make the most of the available opportunities given the scarcity constraints they face.
Notice that there are two key components here:
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
3 / 28
The Rational Consumer
One of the key assumptions underlying economics is the concept of the rational consumer ; i.e., that individuals know what they want and seek to make the most of the available opportunities given the scarcity constraints they face.
Notice that there are two key components here:
1
The notion that individuals have preferences: This defines what they want to consume.
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
3 / 28
The Rational Consumer
One of the key assumptions underlying economics is the concept of the rational consumer ; i.e., that individuals know what they want and seek to make the most of the available opportunities given the scarcity constraints they
Ch. 10: The Rational Consumer
Fall 2010
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
1 / 28
Outline
1
Utility: Getting Satisfaction
2
Budgets and Optimal Consumption
3
The Optimal Consumption Choice
4
Spending the Marginal Dollar
5
From Utility to the Demand Curve
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
2 / 28
The Rational Consumer
One of the key assumptions underlying economics is the concept of the rational consumer
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
3 / 28
The Rational Consumer
One of the key assumptions underlying economics is the concept of the rational consumer ; i.e., that individuals know what they want and seek to make the most of the available opportunities given the scarcity constraints they face.
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
3 / 28
The Rational Consumer
One of the key assumptions underlying economics is the concept of the rational consumer ; i.e., that individuals know what they want and seek to make the most of the available opportunities given the scarcity constraints they face.
Notice that there are two key components here:
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
3 / 28
The Rational Consumer
One of the key assumptions underlying economics is the concept of the rational consumer ; i.e., that individuals know what they want and seek to make the most of the available opportunities given the scarcity constraints they face.
Notice that there are two key components here:
1
The notion that individuals have preferences: This defines what they want to consume.
Herriges (ISU)
Chapter 10: The Rational Consumer
Fall 2010
3 / 28
The Rational Consumer
One of the key assumptions underlying economics is the concept of the rational consumer ; i.e., that individuals know what they want and seek to make the most of the available opportunities given the scarcity constraints they