Econ Exam 3
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4 elements of consumer choice
- prices of goods
- tastes, which rank bundles according to utility
- utility maximization
- maximum affordale quantitiy of one good given the quantity of other goods purchased
- illustrated by the budget line
- illustrates bundles that are available given the budget constraint
- choices made will determine demand for each category
consumer can rank alternative bundles according to the utility they provide
consumers are consistent
consumers prefer more utility to less
Diminishing marginal rate of substitution
as a consumer consumes more units, they gain less utility
- a way of representing tastes
- all points on the same curve yield the same utility
- cannot cross eachother
- slope downward
going outside the indifference curv would
Consumers make purchase decions where the budget line is...
tanget to indefference curve
The exact bundle chosen by a consumer is given by....
the point on an indifference curve that is tangent to the budget constraint line
Suggests that marketing programs can be designed assuming consumers...
- maximize utility
- behave rationally
- how one should
- utility theory
how one could
what one actually does
What would you like to do?
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