ECON 100A Chapter Notes - Chapter 3: Indifference Curve, Utility, Consumer Behaviour
Document Summary
Theory of consumer behavior: explanation of how consumers allocate incomes to the purchase of different goods and services. Consumer behavior in three steps: consumer preferences, budget restraints, consumer choices. Market basket: list with specific quantities of one or more goods. Describe items in market basket in terms of total number of units of each commodity. Completeness: consumer can compare and rank all possible baskets: indifferent: person will be equally satisfied with either basket a or b, these preferences ignore costs. Transitivity: if consumer prefers basket a to b and basket b to c, then consumer also prefers a to c: normally regarded as necessary for consumer consistency. More is better than less: consumers prefer more of any good to less: more is always better, even if just a little better. Indifference curve: curve representing all combinations of market baskets that provide consumer with same level of satisfaction. Above and right of curve u1 = desired.
