CAS AR 101 Lecture Notes - Lecture 9: Consumer Choice, Economic Surplus, Demand Curve
26 Mar 2018
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Lecture 9: consumer choice and consumer welfare: consumer choice: (behavioral economics) Different quantities of various goods + services different amount of utility. Rational people want to purchase combination of goods + services that maximize their utility. **within constraints (limits) imposed by income + wealth: maximizing utility: 1st part of income on basics: food and shelter. 2nd part of income on comfort income remaining: luxuries. 3rd: often a luxury more: maybe worse off: willingness to pay: Consumers are willing to pay for a good because of the utility and welfare it creates. Wtp = max amount consumer pay for a good. Consumer surplus: monetary value of the utility remaining to the consumer after paid. Cs = wtp p: marginal willingness to pay: Wtp curve is the same as demand curve but different functions. Wtp is used to construct demand: wtp for several units:
