Economics 2150A/B Study Guide - Budget Constraint, Indifference Curve, Consumer Behaviour

• School: Western University
• Department: Economics
• Course: Economics 2150A/B
• Professor: Prof

Document Summary

Goal: develop a model of consumer behaviour to derive demand curves. 3 develop a way to model consumer preferences with utility curves. 4 add a budget constraint to get consumer maximization problem and the ordinary. 5 applications of demand theory: consumer theory assumes self-interest and rationality among consumers. Self-interest: the consumer will behave in a way that maximizes his or her satisfaction (utility). Indifference curves (i. c. ) represent the level of utility that the consumer derives from consuming particular bundles of goods in a world where there are only two goods. Shape of the indifference curves will represent the relative preference that the consumer has for one good over the other good. Says individuals always make choices to make themselves better off: experimental economics. Reality: preferences are less well-defined in children: the theory of self-interest does not eliminate the possibility of charitable giving. Charitable giving can be explained with self-interest if we: