1、Lecture 4 Consumer Behavior 1Chapter 1 Topics to be Discussed nConsumer Preferences nBudget Constraints nConsumer Choice nRevealed Preferences nMarginal Utility and Consumer Choices nCost-of-Living Indexes 2Chapter 1 Consumer Purchasing Decision Making Process Preference Budget ConstraintChoice 3Cha
2、pter 1 Consumer Behavior nTwo applications that illustrate the importance of the economic theory of consumer behavior are: lApple-Cinnamon Cheerios lThe Food Stamp Program. 4Chapter 1 Consumer Behavior nGeneral Mills had to determine how high a price to charge for Apple- Cinnamon Cheerios before it
3、went to the market. 5Chapter 1 Consumer Behavior nWhen the food stamp program was established in the early 1960s, the designers had to determine to what extent the food stamps would provide people with more food and not just simply subsidize the food they would have bought anyway. 6Chapter 1 Consume
4、r Behavior nThese two problems require an understanding of the economic theory of consumer behavior. 7Chapter 1 Consumer Behavior nThere are three steps involved in the study of consumer behavior. 1) We will study consumer preferences. uTo describe how and why people prefer one good to another. 2) T
5、hen we will turn to budget constraints. uPeople have limited incomes. 8Chapter 1 Consumer Behavior nThere are three steps involved in the study of consumer behavior. 3) Finally, we will combine consumer preferences and budget constraints to determine consumer choices. uWhat combination of goods will
6、 consumers buy to maximize their satisfaction? 9Chapter 1 Example Do you agree with the following statement? 湖南人不怕辣，贵州人辣不怕，四川人怕不辣， 可见四川人最能吃辣椒。 10Chapter 1 Consumer Preferences nA market basket is a collection of one or more commodities. nOne market basket may be preferred over another market basket
7、containing a different combination of goods. Market Baskets 11Chapter 1 Consumer Preferences nThree Basic Assumptions 1) Preferences are complete. 2) Preferences are transitive. 3) Consumers always prefer more of any good to less. Market Baskets 12Chapter 1 Consumer Preferences A2030 B1050 D4020 E30
8、40 G1020 H1040 Market BasketUnits of Food Units of Clothing 13Chapter 1 Consumer Preferences nIndifference curves represent all combinations of market baskets that provide the same level of satisfaction to a person. Indifference Curves 14Chapter 1 The consumer prefers A to all combinations in the bl
9、ue box, while all those in the pink box are preferred to A. Consumer Preferences Food (units per week) 10 20 30 40 10203040 Clothing (units per week) 50 G A EH B D 15Chapter 1 U1 Combination B,A, & D yield the same satisfaction E is preferred to U1 U1 is preferred to H & G Consumer Preferences Food
10、(units per week) 10 20 30 40 10203040 Clothing (units per week) 50 G D A E H B 16Chapter 1 Consumer Preferences nIndifference Curves lIndifference curves slope downward to the right. uIf it sloped upward it would violate the assumption that more of any commodity is preferred to less. lAny market bas
11、ket lying above and to the right of an indifference curve is preferred to any market basket that lies on the indifference curve. 17Chapter 1 Consumer Preferences nAn indifference map is a set of indifference curves that describes a persons preferences for all combinations of two commodities. lEach i
12、ndifference curve in the map shows the market baskets among which the person is indifferent. Indifference Maps 18Chapter 1 Consumer Preferences nIndifference Curves lFinally, indifference curves cannot cross. uThis would violate the assumption that more is preferred to less. 19Chapter 1 U2 U3 Consum
13、er Preferences Food (units per week) Clothing (units per week) U1 A B D Market basket A is preferred to B. Market basket B is preferred to D. 20Chapter 1 U1 U2 Consumer Preferences Food (units per week) Clothing (units per week) A D B The consumer should be indifferent between A, B and D. However, B
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