微观经济学21_RH.ppt

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: WHAT THE CONSUMER CAN AFFORD The budget constraint depicts the limit on the consumption “bundles” that a consumer can afford. People consume less than they might desire because their spending is constrained, or limited, by their income. THE BUDGET CONSTRAINT: WHAT THE CONSUMER CAN AFFORD The budget constraint shows the various combinations of goods the consumer can afford given his or her income and the prices of the goods. It is generally shown in terms of the amount of two goods This makes sense if viewed as the remaining choices for given quantities of other goods. Figure 1 The Consumer’s Budget Constraint THE BUDGET CONSTRAINT: WHAT THE CONSUMER CAN AFFORD The Consumer’s Budget Constraint Any comparison of two points on the budget constraint illustrates the trade-off between two goods. For example, if the consumer buys no pizzas, he can afford 500 pints of Pepsi (point B). If he buys no Pepsi, he can afford 100 pizzas (point A). Figure 1 The Consumer’s Budget Constraint THE BUDGET CONSTRAINT: WHAT THE CONSUMER CAN AFFORD The Consumer’s Budget Constraint Alternately, the consumer can buy 50 pizzas and 250 pints of Pepsi. Figure 1 The Consumer’s Budget Constraint THE BUDGET CONSTRAINT: WHAT THE CONSUMER CAN AFFORD The slope of the budget constraint equals the relative price of the two goods, that is, the price of one good compared to the price of the other. It measures the rate at which the consumer can trade one good for the other. PREFERENCES: WHAT THE CONSUMER WANTS For a few minutes, ignore prices and budgets. Start with an arbitrary point, call it C. Perhaps C = (400 pepsi’s, 20 pizzas) Now take another alternative, W. Suppose W = (250 pepsi’s, 21 pizzas) Assume the consumer prefers C to W. Suppose X = (250 pepsi’s, 60 pizz