View
2
Download
0
Category
Preview:
DESCRIPTION
vfs
Citation preview
7/18/2019 ch03_08_31_08 (1)
1/37
Fernando & YvonnQuijano
Prepared by:
Consumer
Behavior
3
CHA
P
TE
R
Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
7/18/2019 ch03_08_31_08 (1)
2/37
Chapter3:Consum
erBehavior
2 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
CHAPTER 3 OT!"#E
(.) Consu#er Pre&erences
(.2 *udget Constraints
(.( Consu#er Choice
(.+ Reeaed Pre&erence
(.- "argina tiity and Consu#er Choice
(./ Costo&1iing Indees
7/18/2019 ch03_08_31_08 (1)
3/37
Chapter3:Consum
erBehavior
3 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
Consu#er *ehaior
theory of $onsumer behavior 3escription o& ho4consu#ers aocate inco#es a#ong di&&erent goods andserices to #ai#i5e their 4ebeing.
Consu#er behaior is best understood in three distinct steps6
). Consu#er pre&erences
2. *udget constraints
(. Consu#er choices
7/18/2019 ch03_08_31_08 (1)
4/37
Chapter3:Consum
erBehavior
% of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
C78"ER PRE:ERE8CE(.)
&ar'et Bas'ets
mar'et bas'et ;orbund(e
7/18/2019 ch03_08_31_08 (1)
5/37
Chapter3:Consum
erBehavior
- of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
C78"ER PRE:ERE8CE(.)
.ome Basi$ Assumptions about Preferen$es
*) Comp(eteness: Pre&erences are assu#ed to be complete. Inother 4ords, consu#ers can co#pare and ran$ a possibebas$ets. Thus, &or any t4o #ar$et bas$etsA and B, a consu#er4i pre&erA to B, 4i pre&er B toA, or 4i be indi&&erent bet4een
the t4o. *y indifferent 4e #ean that a person 4i be e=uaysatis&ied 4ith either bas$et.
8ote that these pre&erences ignore costs. A consu#er #ightpre&er stea$ to ha#burger but buy ha#burger because it ischeaper.
7/18/2019 ch03_08_31_08 (1)
6/37
Chapter3:Consum
erBehavior
/ of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
C78"ER PRE:ERE8CE(.)
.ome Basi$ Assumptions about Preferen$es
2) Transitivity: Pre&erences are transitive. Transitiity #eans thati& a consu#er pre&ers bas$etA to bas$et B and bas$et B tobas$et C, then the consu#er aso pre&ersA to C. Transitiity isnor#ay regarded as necessary &or consu#er consistency.
3) &ore is better than (ess: >oods are assu#ed to be desirabe?i.e., to be good. Conse=uenty, consumers always prefermore of any good to less. In addition, consu#ers are neersatis&ied or satiated@ more is always better, even if just a littlebetter. This assu#ption is #ade &or pedagogic reasons@na#ey, it si#pi&ies the graphica anaysis. 7& course, so#egoods, such as air poution, #ay be undesirabe, andconsu#ers 4i a4ays pre&er ess. e ignore these Bbads inthe contet o& our i##ediate discussion.
7/18/2019 ch03_08_31_08 (1)
7/37
Chapter3:Consum
erBehavior
7 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
0es$ribin, "ndividua( Preferen$es
*ecause #ore o& each good ispre&erred to ess, 4e can
co#pare #ar$et bas$ets in theshaded areas. *as$etAis cearypre&erred to bas$et G, 4hie Eisceary pre&erred toA.
Ho4eer,Acannot be co#pared4ith B, D, or H4ithout additionain&or#ation.
C78"ER PRE:ERE8CE(.)
+i,ure 3)*
"ndifferen$e Curves
7/18/2019 ch03_08_31_08 (1)
8/37
Chapter3:Consum
erBehavior
1 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
The indi&&erence cure )that
passes through #ar$et bas$etAsho4s a bas$ets that giethe consu#er the sa#e ee o&satis&action as does #ar$etbas$etA@ these incudebas$ets Band D.
An "ndifferen$e Curve
C78"ER PRE:ERE8CE(.)
+i,ure 3)2
"ndifferen$e Curves
indifferen$e $urve Cure representing a co#binations o& #ar$etbas$ets that proide a consu#er 4ith the sa#e ee o& satis&action.
7ur consu#er pre&ers bas$etE, 4hich ies aboe ), toA,
but pre&ersAto Hor G, 4hichie beo4 ).
7/18/2019 ch03_08_31_08 (1)
9/37
Chapter3:Consum
erBehavior
of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
An indi&&erence #ap is a set o&
indi&&erence cures thatdescribes a personDspre&erences.
An "ndifferen$e &ap
C78"ER PRE:ERE8CE(.)
+i,ure 3)3
"ndifferen$e &aps
indifferen$e map >raph containing a set o& indi&&erence curessho4ing the #ar$et bas$ets a#ong 4hich a consu#er is indi&&erent.
Any #ar$et bas$et onindi&&erence cure (, such as
bas$etA, is pre&erred to anybas$et on cure 2;e.g.,
bas$et B
7/18/2019 ch03_08_31_08 (1)
10/37
Chapter3:Consum
erBehavior
*4 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
I& indi&&erence cures )and 2
intersect, one o& the
assu#ptions o& consu#ertheory is ioated.
"ndifferen$e Curves Cannot "nterse$t
C78"ER PRE:ERE8CE(.)
+i,ure 3)%
"ndifferen$e &aps
According to this diagra#, theconsu#er shoud be indi&&erenta#ong #ar$et bas$etsA, B,and D. et Bshoud bepre&erred to Dbecause Bhas#ore o& both goods.
7/18/2019 ch03_08_31_08 (1)
11/37
Chapter3:Consum
erBehavior
** of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
The #agnitude o& the sope o& an
indi&&erence cure #easures theconsu#erFs #argina rate o&substitution ;"R< bet4een t4ogoods.
The &ar,ina( Rate of .ubstitution
C78"ER PRE:ERE8CE(.)
+i,ure 3)-
The &ar,ina( Rate of .ubstitution
In this &igure, the "R bet4een cothing;C< and &ood ;!< &as &ro# / ;bet4eenAand B< to + ;bet4een Band D< to 2;bet4een Dand E< to ) ;bet4een Eand
G
7/18/2019 ch03_08_31_08 (1)
12/37
Chapter3:Consum
erBehavior
*2 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
C78"ER PRE:ERE8CE(.)
Perfe$t .ubstitutes and Perfe$t Comp(ements
perfe$t substitutes T4o goods &or 4hich the #argina rateo& substitution o& one &or the other is a constant.
perfe$t $omp(ements T4o goods &or 4hich the "R is5ero or in&inite@ the indi&&erence cures are shaped as rightanges.
bad >ood &or 4hich ess is pre&erred rather than #ore.
Bads
7/18/2019 ch03_08_31_08 (1)
13/37
Chapter3:Consum
erBehavior
*3 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
In 6a8*ob ie4s orange Guice andappe Guice as per&ect substitutes6He is a4ays indi&&erent bet4een agass o& one and a gass o& theother.
Perfe$t .ubstitutes and Perfe$t Comp(ements
C78"ER PRE:ERE8CE(.)
+i,ure 3)/
Perfe$t .ubstitutes and Perfe$t Comp(ements
In 6b, ane ie4s e&t shoes andright shoes as per&ect co#pe#ents6
An additiona e&t shoe gies her noetra satis&action uness she aso
obtains the #atching right shoe.
7/18/2019 ch03_08_31_08 (1)
14/37
Chapter3:Consum
erBehavior
*% of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
Pre&erences &or auto#obie attributes can be described byindi&&erence cures. Each cure sho4s the co#bination o&acceeration and interior space that gie the sa#esatis&action.
Preferen$es for Automobi(e Attributes
C78"ER PRE:ERE8CE(.)
74ners o& :ord "ustang coupes 6aare4iing to gie up considerabe interiorspace &or additiona acceeration.
+i,ure 3)7
The opposite is true &or o4ners o&:ord Eporers 6b. They pre&erinterior space to acceeration.
7/18/2019 ch03_08_31_08 (1)
15/37
Chapter3:Consum
erBehavior
*- of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
C78"ER PRE:ERE8CE(.)
A utiity &unction can berepresented by a set o&indi&&erence cures, each4ith a nu#ericaindicator.
This &igure sho4s threeindi&&erence cures ;4ithutiity ees o& 2-, -0,and )00, respectieyET C78TRAI8T(.2
The tabe sho4s #ar$et bas$ets associated 4ith the budget ine
! 2CJ KL0
The Bud,et !ine
bud,et $onstraints Constraints that consu#ers &aceas a resut o& i#ited inco#es.
bud,et (ine A co#binations o& goods &or 4hich the totaa#ount o& #oney spent is e=ua to inco#e.
TAB!E 3)2 &ar'et Bas'ets and the Bud,et !ine
A 0 +0 KL0
B 20 (0 KL0
D +0 20 KL0
E /0 )0 KL0
G L0 0 KL0
&ar'et Bas'et +ood 6F Tota( .pendin,
F CP F P C I+ = 63)*
7/18/2019 ch03_08_31_08 (1)
18/37
Chapter3:Consum
erBehavior
*1 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
*3>ET C78TRAI8T(.2
A budget ine describes theco#binations o& goods that can bepurchased gien the consu#erFsinco#e and the prices o& the goods.
1ineAG;4hich passes throughpoints B, D, and E< sho4s thebudget associated 4ith an inco#eo& KL0, a price o& &ood o& "!J K)
per unit, and a price o& cothing o&"CJ K2 per unit.
The sope o& the budget ine
;#easured bet4een points Band DI8A1 TI1IT A83 C78"ER CH7ICE(.-
mar,ina( uti(ity 6& Additiona satis&action obtained
&ro# consu#ing one additiona unit o& a good. diminishin, mar,ina( uti(ity Principe that as #ore o& a good is
consu#ed, the consu#ption o& additiona a#ounts 4i yieds#aer additions to utiity.
( / ) MU /MUC FF C
=
0 MU ( ) MU ( )F CF C
= +
MRS MU /MUF C
=
MRS /P PF C
=
MU / MU /P PF FC C
=
MU / MU /P PF F C C
=
e;ua( mar,ina( prin$ip(e Principe that utiity is #ai#i5ed4hen the consu#er has e=uai5ed the #argina utiity per doar o&ependiture across a goods.
63)-
63)/
63)7
7/18/2019 ch03_08_31_08 (1)
30/37
Chapter3:ConsumerBehavior
34 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
&ar,ina( ti(ity and Happiness
"AR>I8A1 TI1IT A83 C78"ER CH7ICE(.-
A co#parison o& #ean ees o& satis&action 4ith i&e across inco#e casses in thenited tates sho4s that happiness increases 4ith inco#e, but at a di#inishingrate.
+i,ure 3)24
7/18/2019 ch03_08_31_08 (1)
31/37
Chapter3:ConsumerBehavior
3* of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
"neffi$ien$y of
7/18/2019 ch03_08_31_08 (1)
32/37
Chapter3:ConsumerBehavior
32 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
Comparin,
7/18/2019 ch03_08_31_08 (1)
33/37
Chapter3:ConsumerBehavior
33 of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
C7T7:1II8> I83EQE(./
"dea( Cost=of=!ivin, "nde5
$ost=of=(ivin, inde5 Ratio o& the present cost o& atypica bunde o& consu#er goods and serices co#pared4ith the cost during a base period.
idea( $ost=of=(ivin, inde5 Cost o& attaining a gienee o& utiity at current prices reatie to the cost o&attaining the sa#e utiity at baseyear prices.
7/18/2019 ch03_08_31_08 (1)
34/37
Chapter3:ConsumerBehavior
3% of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
C7T7:1II8> I83EQE(./
The initia budget constraint&acing arah in )99- is gien byine l)@ her utiity#ai#i5ing
co#bination o& &ood and boo$sis at pointAon indi&&erencecure ).
Rache re=uires a budgetsu&&icient to purchase the &oodboo$ consu#ption bunde gienby point Bon ine l2;and
tangent to indi&&erence cure
)
7/18/2019 ch03_08_31_08 (1)
35/37
Chapter3:ConsumerBehavior
3- of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
C7T7:1II8> I83EQE(./
A price inde, 4hich representsthe cost o& buying bundeAatcurrent prices reatie to thecost o& bundeAat baseyearprices, oerstates the ideacosto&iing inde.
"dea( Cost=of=!ivin, "nde5
TAB!E 3)3 "dea( Cost=of=!ivin, "nde5
Price o& boo$s K20%boo$ K)00%boo$
8u#ber o& boo$s )- /
Price o& &ood K2.00%b. K2.20%b.
Pounds o& &ood )00 (00
Ependiture K-00 K)2/0
244- 6Rachel*- 6Sarah
Cost=of=!ivin, "nde5es
+i,ure 3)23
7/18/2019 ch03_08_31_08 (1)
36/37
Chapter3:ConsumerBehavior
3/ of 37Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.
C7T7:1II8> I83EQE(./
!aspeyres "nde5
!aspeyres pri$e inde5 A#ount o& #oney at current yearprices that an indiidua re=uires to purchase a bunde o& goodsand serices chosen in a base year diided by the cost o&purchasing the sa#e bunde at baseyear prices.
Paas$he inde5 A#ount o& #oney at currentyear prices thatan indiidua re=uires to purchase a current bunde o& goods andserices diided by the cost o& purchasing the sa#e bunde in abase year.
Comparin, "dea( Cost=of=!ivin, and !aspeyres "nde5esThe 1aspeyres inde oerco#pensates Rache &or the highercost o& iing, and the 1aspeyres costo&iing inde is, there&ore,
greater than the idea costo&iing inde.
Comparin, the !aspeyres and Paas$he "nde5es ust as the1aspeyres inde 4i oerstate the idea cost o& iing, thePaasche 4i understate it because it assu#es that the indiidua4i buy the currentyear bunde in the base period.
Paas$he "nde5
7/18/2019 ch03_08_31_08 (1)
37/37
Chapter3:ConsumerBehavior
C7T7:1II8> I83EQE(./
fi5ed=ei,ht inde5 Costo&iing inde in 4hich the
=uantities o& goods and serices re#ain unchanged.
$hain=ei,hted pri$e inde5 Costo&iing inde thataccounts &or changes in =uantities o& goods and serices.
Pri$e "nde5es in the nited .tates: Chain >ei,htin,
A co##ission chaired by tan&ord niersity pro&essor "ichae*os$in concuded that the CPI oerstated in&ation byapproi#atey ).) percentage points?a signi&icant a#ount gienthe reatiey o4 rate o& in&ation in the nited tates in recentyears.
Approi#atey 0.+ percentage points o& the ).)percentagepointbias 4as due to the &aiure o& the 1aspeyres price inde to account&or changes in the current year #i o& consu#ption o& theproducts in the baseyear bunde.
Recommended