The Theory of Consumer choice Chapter 21
The Theory of Consumer Choice Chapter 21
The Theory of Consumer Choice The theory of consumer choice addresses the following questions Do all demand curves slope downward? How do wages affect labor supply? How do interest rates affect household saving?
The Theory of Consumer Choice • The theory of consumer choice addresses the following questions: – Do all demand curves slope downward? – How do wages affect labor supply? – How do interest rates affect household saving?
The Budget Constraint The budget constraint depicts the consumption"bundles"that a consumer can afford People consume less than they desire because their spending is constrained, or limited b y their income e It shows the various combinations of goods the consumer can afford given his or her income and the prices of the two goods
The Budget Constraint • The budget constraint depicts the consumption “bundles” that a consumer can afford. – People consume less than they desire because their spending is constrained, or limited, by their income. • It shows the various combinations of goods the consumer can afford given his or her income and the prices of the two goods
The Budget Constraint Pints Number pending Spending Total of Pepsi of PIzzas on Pepsi on pizza sp pending 0 100 0 1,000 1,000 50 90 100 900 1.000 100 80 200 800 1,000 150 70 300 700 1.000 200 60 400 600 1.000 250 50 500 500 1,000 300 40 600 400 1.000 350 30 700 300 1.000 400 20 800 200 1.000 450 10 900 100 1.000 500 0 1,000 1.000
The Budget Constraint
The Consumers budget Constraint Quantity of Pepsi B 500 250 甲, Consumer's budget constraint 0 50 100 Quantity of pizza
Quantity of Pizza Quantity of Pepsi 0 250 50 100 500 B C A Consumer’s budget constraint The Consumer’s Budget Constraint