1. Chapter 6 The Logic of Consumer Choice

2. Schedule1 Schedule 2 Schedule 3 Schedule 4 Units of ATU Units of B TU Units of C TU Units of D TU 17 124 136 1126 213 244 266 2234 318 360 390 3324 422 472 4108 4396 525 582 5120 5450 628 690 6129 6486 729 796 7135 7513 830 8100 8138 8531

3. Do RATS understand the inverse relationship between price and quantity? Choice between two liquids –Root beer –Collins mix Given 300 pushes (each liquid had a different number of pushes to get it – price) Found rats switched to the “cheaper” liquid when the “price” changed

4. Why isn’t education and medical care free? If cost = 0 when do we stop using it? When MU = 0 Thus we will see a lot of frivolous use of programs. It costs you nothing so use it.

5. Consumer Surplus The difference between the actual price buyers pay for a good and the maximum amount they are WILLING and ABLE to pay for it Dollar measure of benefit gained from a price decrease

6. Consumer Surplus cont. Triangle under the demand curve and above the equilibrium price out to the equilibrium quantity

7. Consumers' Surplus

8. Changes in Supply affect Consumer Surplus Decrease in the number of sellers Advance in technology Increase in the price of relevant resources A per-unit subsidy placed on producers/seller

9. Consumers' Surplus

10. Sales schemes Consumer is willing to buy –One pair of shorts for $40 –Second pair of shorts for $30 Store has a choice –Sell shorts for $30 –Have sale where buy first for $40 get $10 off second pair? –Which has more CS??? (hint only use the demand curve)

11. Consumers’ Surplus and Two Pricing Schemes

12. Do we understand Chapter 6?? In-class exercise 6

13. Chapter 6 homework Numbers 3 and 4 Working with graphs and numbers 1, 3, 4 and 5