MGCR 293 Lecture Notes - Lecture 6: Market Basket, Indifference Curve
22 Sep 2016
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Document Summary
Consumer behaviour: consumer preferences, to describe how people prefer one good to another, budget constraints, people have limited incomes, consumer choices, what combination of goods will consumers buy to maximize their satisfaction. Market baskets: collection of one or more commodities: one market basket may be preferred over another market basket containing a different combination of goods, consumers always prefer more of any good to less. Consumer preferences are usually explained by cultural differences. Preferences can be compared and rank-ordered: ex: for any market basket you may prefer a certain good to another, or be indiferent. Preferences are transitive: ex: you prefer a ferrari to a bmw, and a bmw to a honda, therefore prefer a. More the merrier: prefer more goods than just 1. Diminishing marginal utility: there is a decline in the marginal utility of each additional unit of a product consumed. Contains points representing market baskets among which the consumer is indifferent.
