1 CHAPTER 5 CONSUMER CHOICE E CONOMICS U PDATED S ECOND E DITION R OBERT E. H ALL S TANFORD U NIVERSITY M ARC L IEBERMAN N EW Y ORK U NIVERSITY.

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Presentation transcript:

1 CHAPTER 5 CONSUMER CHOICE E CONOMICS U PDATED S ECOND E DITION R OBERT E. H ALL S TANFORD U NIVERSITY M ARC L IEBERMAN N EW Y ORK U NIVERSITY

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 2 Figure 1The Budget Constraint Number of Concerts per Month Number of Movies per Month A B C D E G H F Max’s Consumption Possibilities with Income of $150 Concerts at $30 eachMovies at $10 each Total Expenditure on Concerts Total Expenditure on MoviesQuantity A0$015$150 B1$ C2$609$90 D3$ 6$60 E4$1203$30 F5 500$0

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 3 Figure 2Changes in the Budget Line Number of Concerts per Month Number of Concerts per Month Number of Concerts per Month Number of Movies per Month 5 Number of Movies per Month Number of Movies per Month 15 5 (a)(b)(c)

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 4 Figure 3Total and Marginal Utility Ice Cream Cones per Week Utils Ice Cream Cones per Week Utils Total Utility Marginal Utility (a) (b) Lisa’s Total and Marginal Utility from Consuming Ice Cream Cones Number of Cones Total Utility Marginal Utility 00 utils utils 5 utils 465 utils 3 utils 568 utils 0 utils 668 utils

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 5 Figure 4Consumer Decision Making Number of Concerts per Month Number of Movies per Month A B C D E G F CONCERTS at $30 eachMOVIES at $10 each (4)(7) MarginalMarginal Utility per Dollar (1)(2)(3)Spent on(5)(6)Spent on Point onNumber ofMarginalLast ConcertNumberMarginalLast Movie BudgetConcerts perUtility from(MU concerts /of MoviesUtility from(MU movies / LineMonthLast ConcertP concerts )per MonthLast MovieP movies ) A0——15505 B11, C21, D E F —

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 6 Figure 5Effects of an Increase in Income Number of Concerts per Month Number of Movies per Month A B C D E F H ´ H H ´´ 27

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 7 Figure 6Deriving the Demand Curve Number of Concerts per Month Number of Movies per Month D 6 (a) K ´ 0 Number of Concerts per Month Price per Concert (b) D Max's Demand Curve for Concerts $ J J ´ 11 J 6 30 K 12 K 5

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 8 Figure 7Income and Substitution Effects

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 9 Figure 8From Individual to Market Demand

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 10 Figure 9Time Allocation Economics Score C 90 French Score F E D

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 11 Figure A.1An Indifference Curve

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 12 Figure A.2An Indifference Map

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 13 Figure A.3Consumer Decision Making Minutes of Phone Time U n i t s o f A l l O t h e r G o o d s 20 E S 200 R

ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 14 Figure A.4 Deriving the Demand Curve P r i c e p e r M i n u t e o f P h o n e T i m e Minutes of Phone Time Minutes of Phone Time E F Kate’s Demand for Phone Time $ (b) U n i t s o f A l l O t h e r G o o d s E F (a)