1. Consumer theory
Chapter 3

2. Contents Why to study this topic.. Assumptions Indifference curve
Budget Line
Consumer Equilibrium

3. Why to study this topic..
To know about motivation and behavior of consumer..
To know about the next move of seller for a customer..
To strategize customer loyalty..

4. Assumptions Consumer has single objective of
‘Maximizing their total utility’
Utility is related to value or satisfaction..
There is a budget constraint always..
Two product consumption model: for graphical analysis
Utility can be cardinal or ordinal…

5. Indifference curve (IC)
A curve that shows various combinations of two products between which the consumer is indifferent
He derives same satisfaction by consuming these products..
As they give same total utility..
Ordinal Utility..

6. IC The Indifference Curve Map IC has 1 Negative Slope 2 Convexity
3 Transitivity: higher IC gives higher
satisfaction thus parallel shape
Patty
Burger

7. Budget Line
Budget Line: is the maximum combination of products that can be purchased with fixed sum of money.
M= PxX + PyY
Budget: Rs 100
Patty (Rs 10 per unit)
Burger (Rs 5 per unit)

8. Equilibrium analysis for consumer
Burger