Consumer Preferences Market Baskets Amarket basket is a collection of one or more commodities a One market basket may be preferred over another market basket containing a different combination of goods Chapter 3: Consumer Behavior Slide 11
Chapter 3: Consumer Behavior Slide 11 Consumer Preferences ◼ A market basket is a collection of one or more commodities. ◼ One market basket may be preferred over another market basket containing a different combination of goods. Market Baskets
Consumer Preferences Market Baskets a Three Basic Assumptions 1)Preferences are complete 2) Preferences are transitive 3Consumers always prefer more of any good to less Chapter 3: Consumer Behavior Slide 12
Chapter 3: Consumer Behavior Slide 12 Consumer Preferences ◼ Three Basic Assumptions 1) Preferences are complete. 2) Preferences are transitive. 3) Consumers always prefer more of any good to less. Market Baskets
Consumer Preferences Market Basket Units of Food Units of clothing A 20 30 B 10 50 40 20 E 30 40 G 10 20 H 10 40 Chapter 3: Consumer Behavior Slide 13
Chapter 3: Consumer Behavior Slide 13 Consumer Preferences A 20 30 B 10 50 D 40 20 E 30 40 G 10 20 H 10 40 Market Basket Units of Food Units of Clothing
Consumer Preferences Indifference Curves a Indifference curves represent all combinations of market baskets that provide the same level of satisfaction to a person Chapter 3: Consumer Behavior Slide 14
Chapter 3: Consumer Behavior Slide 14 Consumer Preferences ◼ Indifference curves represent all combinations of market baskets that provide the same level of satisfaction to a person. Indifference Curves
Consumer Preferences Clothing The consumer prefers (units per week) A to all combinations 50 B the blue box, while all those in the pink box are preferred to A 40 H E A 30 D 20 ●G 10 Food 10 20 30 40 (units per week) Chapter 3: Consumer Behavior Slide 15
Chapter 3: Consumer Behavior Slide 15 The consumer prefers A to all combinations in the blue box, while all those in the pink box are preferred to A. Consumer Preferences Food (units per week) 10 20 30 40 10 20 30 40 Clothing (units per week) 50 G A H E B D