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
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Preliminary Economics Topic One: Introduction to Economics The Nature of Economics The Economic Problem: Wants are unlimited but resources are scarce A Market Economy is when all major economic decisions are made by individuals and business who are motivated by self-interest A Centrally Planned Economy is where the government structures and runs the market and makes all economic decisions Australia operates with a Mixed Economy‚ with elements of both a Market Economy and a Centrally
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of different matrix. The total consumer spending in an economy is generally calculated using the consumption function‚ a matrix devised by John Maynard Keynes‚ which simply takes the aggregate disposable income and multiplies it by a "marginal propensity to consume". This matrix essentially defines consumption as the part of disposable income that does not go into savings. But disposable income in turn can be defined in a number of ways - e.g. to include borrowed funds or expenditures from savings
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Unit-1 Q1. Define micro and macro economics‚ Distinguish between them‚ and explain the scope‚ importance and its limitations Ans. modern economy analysis has been divided into two major branches that is micro and macro economics. Micro economics means the economics system which deals individual economics unit on the other hand macro economics means the economics unit which deals aggregate as a whole that is national income‚ general employment‚ and total out –put‚ general price level etc. These two
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commodity ? (1) 2. W hat is the price elasticity of supply of a commodity whose straight line supply curve passes through the origin forming an angle of 75°? (1) 3. W hat change will take place in marginal product‚ when total product increases at a diminishing rate? (1) 4. G ive the meaning of marginal cost. (1)
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c. He must reduce his consumption of another good. d. He must increase his consumption of another good. ____ 3. What happens to consumer surplus if the price of a good increases? a. It increases. b. It may increase‚ decrease‚ or remain unchanged. c. It is unchanged. d. It decreases. ____ 4. When the price of pizza falls‚ the substitution effect‚ for normal goods Pepsi and pizza‚ causes a. Pepsi to be relatively less expensive‚ so the consumer buys less Pepsi. b. the consumer to feel richer‚ so
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3rd Edition‚ June 2005 Eric Doviak Principles of Microeconomics on the Lecture Notes Preface 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. You might think of a household as a consumer‚ but households are also producers. For example‚ take a look at your kitchen: you take raw materials (meat‚ cheese‚ vegetables‚ eggs‚ salt and pepper) as well as capital
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stimulus‚ 7 showing higher multipliers‚ especially in those models with a low share of constrained individuals‚ which are BoC-GEM and GIMF. As before‚ the outcome is enlarged (almost doubled) when the mon- etary authority accommodates‚ because the decrease in real interest rates has a positive e ect also on the permanent income households‚ instead of crowding it out. E ects of a Permanent Stimulus Afterwards‚ the authors examine how the previously-obtained results might change in case of a scal policy
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the consumer’s budget constraint. b. has no effect on the slope of the consumer’s budget constraint. c. decreases the slope of the consumer’s budget constraint. d. has no effect on the consumer’s budget constraint. ANS: B 6. The following diagram shows one indifference curve representing the preferences for goods X and Y for one consumer. Figure 21-2 Refer to Figure 21-2.What is the marginal rate of substitution between points A and B? a.
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Suppose price of baguette is $1 and price of sushi is $5‚ then to maximize total utility‚ a rational consumer should consume until: a) the marginal utility of baguette divided by the marginal utility of sushi is 1 b) the marginal utility of baguette divided by the marginal utility of sushi is 5 c) the marginal utility of baguette divided by the marginal utility of sushi is 1/5 d) none of the above 2. A perfectly competitive industry is one where a) All
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