微观经济管理学与财务知识分析规划1

1、Topics to be DiscussedConsumer PreferencesBudget ConstraintsConsumer ChoiceRevealed Preferences1Chapter 3: Consumer BehaviorTopics to be DiscussedMarginal Utility and Consumer ChoicesCost-of-Living Indexes2Chapter 3: Consumer BehaviorConsumer BehaviorTwo applications that illustrate the importance o

2、f the economic theory of consumer behavior are:Apple-Cinnamon CheeriosThe Food Stamp Program.3Chapter 3: Consumer BehaviorConsumer BehaviorGeneral Mills had to determine how high a price to charge for Apple-Cinnamon Cheerios before it went to the market.4Chapter 3: Consumer BehaviorConsumer Behavior

3、When the food stamp program was established in the early 1960s, the designers had to determine to what extent the food stamps would provide people with more food and not just simply subsidize the food they would have bought anyway.5Chapter 3: Consumer BehaviorConsumer BehaviorThese two problems requ

4、ire an understanding of the economic theory of consumer behavior.6Chapter 3: Consumer BehaviorConsumer BehaviorThere are three steps involved in the study of consumer behavior.1) We will study consumer preferences.To describe how and why people prefer one good to another.7Chapter 3: Consumer Behavio

5、rConsumer BehaviorThere are three steps involved in the study of consumer behavior.2)Then we will turn to budget constraints.People have limited incomes.8Chapter 3: Consumer BehaviorConsumer BehaviorThere are three steps involved in the study of consumer behavior.3) Finally, we will combine consumer

6、 preferences and budget constraints to determine consumer choices.What combination of goods will consumers buy to maximize their satisfaction?9Chapter 3: Consumer BehaviorConsumer PreferencesA market basket is a collection of one or more commodities.One market basket may be preferred over another ma

7、rket basket containing a different combination of goods.Market Baskets10Chapter 3: Consumer BehaviorConsumer PreferencesThree Basic Assumptions 1) Preferences are complete.2) Preferences are transitive.3) Consumers always prefer more of any good to less.Market Baskets11Chapter 3: Consumer BehaviorCo

8、nsumer PreferencesA2030B1050D4020E3040G1020H1040Market BasketUnits of Food Units of Clothing12Chapter 3: Consumer BehaviorConsumer PreferencesIndifference curves represent all combinations of market baskets that provide the same level of satisfaction to a person.Indifference Curves13Chapter 3: Consu

9、mer BehaviorThe consumer prefersA to all combinationsin the blue box, whileall those in the pinkbox are preferred to A.Consumer PreferencesFood(units per week)1020304010203040Clothing(units per week)50GAEHBD14Chapter 3: Consumer BehaviorU1Combination B,A, & Dyield the same satisfactionE is preferred

10、 to U1U1 is preferred to H & GConsumer PreferencesFood(units per week)1020304010203040Clothing(units per week)50GDAEHB15Chapter 3: Consumer BehaviorConsumer PreferencesIndifference CurvesIndifference curves slope downward to the right.If it sloped upward it would violate the assumption that more of

11、any commodity is preferred to less.16Chapter 3: Consumer BehaviorConsumer PreferencesIndifference CurvesAny market basket lying above and to the right of an indifference curve is preferred to any market basket that lies on the indifference curve.17Chapter 3: Consumer BehaviorConsumer PreferencesAn i

12、ndifference map is a set of indifference curves that describes a persons preferences for all combinations of two commodities.Each indifference curve in the map shows the market baskets among which the person is indifferent.Indifference Maps18Chapter 3: Consumer BehaviorConsumer PreferencesIndifferen

13、ce CurvesFinally, indifference curves cannot cross.This would violate the assumption that more is preferred to less.19Chapter 3: Consumer BehaviorU2U3Consumer PreferencesFood(units per week)Clothing(units per week)U1ABDMarket basket Ais preferred to B.Market basket B ispreferred to D.20Chapter 3: Co

14、nsumer BehaviorU1U2Consumer PreferencesFood(units per week)Clothing(units per week)ADBThe consumer shouldbe indifferent betweenA, B and D. However,B contains more ofboth goods than D.Indifference CurvesCannot Cross21Chapter 3: Consumer BehaviorABDEG-1-611-4-211Observation: The amountof clothing give

15、n up for a unit of food decreasesfrom 6 to 1Consumer PreferencesFood(units per week)Clothing(units per week)23451246810121416Question: Does thisrelation hold for givingup food to get clothing?22Chapter 3: Consumer BehaviorConsumer PreferencesThe marginal rate of substitution (MRS) quantifies the amo

16、unt of one good a consumer will give up to obtain more of another good.It is measured by the slope of the indifference curve.Marginal Rate of Substitution23Chapter 3: Consumer BehaviorConsumer PreferencesFood(units per week)Clothing(units per week)23451246810121416ABDEG-61111-4-2-1MRS = 6MRS = 224Ch

17、apter 3: Consumer BehaviorConsumer PreferencesWe will now add a fourth assumption regarding consumer preference:Along an indifference curve there is a diminishing marginal rate of substitution.Note the MRS for AB was 6, while that for DE was 2.Marginal Rate of Substitution25Chapter 3: Consumer Behav

18、iorConsumer PreferencesQuestionWhat are the first three assumptions?Marginal Rate of Substitution26Chapter 3: Consumer BehaviorConsumer PreferencesIndifference curves are convex because as more of one good is consumed, a consumer would prefer to give up fewer units of a second good to get additional

19、 units of the first one.Consumers prefer a balanced market basketMarginal Rate of Substitution27Chapter 3: Consumer BehaviorConsumer PreferencesPerfect Substitutes and Perfect ComplementsTwo goods are perfect substitutes when the marginal rate of substitution of one good for the other is constant.Ma

20、rginal Rate of Substitution28Chapter 3: Consumer BehaviorConsumer PreferencesPerfect Substitutes and Perfect ComplementsTwo goods are perfect complements when the indifference curves for the goods are shaped as right angles.Marginal Rate of Substitution29Chapter 3: Consumer BehaviorConsumer Preferen

21、cesOrange Juice(glasses)Apple Juice(glasses)234112340PerfectSubstitutes30Chapter 3: Consumer BehaviorConsumer PreferencesRight ShoesLeftShoes234112340PerfectComplements31Chapter 3: Consumer BehaviorConsumer PreferencesBADSThings for which less is preferred to moreExamplesAir pollutionAsbestos32Chapt

22、er 3: Consumer BehaviorConsumer PreferencesWhat Do You Think?How can we account for Bads in the analysis of consumer preferences?33Chapter 3: Consumer BehaviorConsumer PreferencesAutomobile executives must regularly decide when to introduce new models and how much money to invest in restyling.Design

23、ing New Automobiles (I)34Chapter 3: Consumer BehaviorConsumer PreferencesAn analysis of consumer preferences would help to determine when and if car companies should change the styling of their cars.Designing New Automobiles (I)35Chapter 3: Consumer BehaviorConsumer PreferencesThese consumers arewil

24、ling to give up considerablestyling for additionalperformanceStylingPerformanceConsumerPreference A:High MRS36Chapter 3: Consumer BehaviorConsumer PreferencesThese consumers arewilling to give upconsiderableperformance for additional stylingStylingPerformanceConsumerPreference B:Low MRS37Chapter 3:

25、Consumer BehaviorConsumer PreferencesWhat Do You Think?How can we determine the consumers preference?Designing New Automobiles (I)38Chapter 3: Consumer BehaviorConsumer PreferencesA recent study of automobile demand in the United States shows that over the past two decades most consumers have prefer

26、red styling over performance.Designing New Automobiles (I)39Chapter 3: Consumer BehaviorConsumer PreferencesGrowth of Japanese Imports1970s and 1980s15% of domestic cars underwent a style change each yearThis compares to 23% for importsDesigning New Automobiles (I)40Chapter 3: Consumer BehaviorConsu

27、mer PreferencesUtilityUtility: Numerical score representing the satisfaction that a consumer gets from a given market basket.41Chapter 3: Consumer BehaviorConsumer PreferencesUtilityIf buying 3 copies of Microeconomics makes you happier than buying one shirt, then we say that the books give you more

28、 utility than the shirt.42Chapter 3: Consumer BehaviorConsumer PreferencesUtility FunctionsAssume:The utility function for food (F) and clothing (C) U(F,C) = F + 2C Market Baskets: F units C units U(F,C) = F + 2C A 8 3 8 + 2(3) = 14 B 6 4 6 + 2(4) = 14 C 4 4 4 + 2(4) = 12 The consumer is indifferent

29、 to A & B The consumer prefers A & B to C43Chapter 3: Consumer BehaviorConsumer PreferencesFood(units per week)10155510150Clothing(unitsper week)U1 = 25U2 = 50 (Preferred to U1)U3 = 100 (Preferred to U2)ABCAssume: U = FCMarket Basket U = FCC 25 = 2.5(10)A 25 = 5(5)B 25 = 10(2.5)Utility Functions & I

30、ndifference Curves44Chapter 3: Consumer BehaviorConsumer PreferencesOrdinal Versus Cardinal UtilityOrdinal Utility Function: places market baskets in the order of most preferred to least preferred, but it does not indicate how much one market basket is preferred to another.Cardinal Utility Function:

31、 utility function describing the extent to which one market basket is preferred to another.45Chapter 3: Consumer BehaviorConsumer PreferencesOrdinal Versus Cardinal RankingsThe actual unit of measurement for utility is not important.Therefore, an ordinal ranking is sufficient to explain how most ind

32、ividual decisions are made.46Chapter 3: Consumer BehaviorBudget ConstraintsPreferences do not explain all of consumer behavior.Budget constraints also limit an individuals ability to consume in light of the prices they must pay for various goods and services.47Chapter 3: Consumer BehaviorBudget Cons

33、traintsThe Budget LineThe budget line indicates all combinations of two commodities for which total money spent equals total income.48Chapter 3: Consumer BehaviorBudget ConstraintsThe Budget LineLet F equal the amount of food purchased, and C is the amount of clothing.Price of food = Pf and price of

34、 clothing = PcThen Pf F is the amount of money spent on food, and Pc C is the amount of money spent on clothing.49Chapter 3: Consumer BehaviorBudget ConstraintsThe budget line then can be written:50Chapter 3: Consumer BehaviorBudget ConstraintsA040$80B2030$80D4020$80E6010$80G800$80Market BasketFood

35、(F) Clothing (C)Total SpendingPf = ($1)Pc = ($2)PfF + PcC = I51Chapter 3: Consumer BehaviorBudget Line F + 2C = $801020(I/PC) = 40Budget ConstraintsFood(units per week)406080 = (I/PF)201020300ABDEGClothing(unitsper week)Pc = $2 Pf = $1 I = $8052Chapter 3: Consumer BehaviorBudget ConstraintsThe Budge

36、t LineAs consumption moves along a budget line from the intercept, the consumer spends less on one item and more on the other.The slope of the line measures the relative cost of food and clothing.The slope is the negative of the ratio of the prices of the two goods.53Chapter 3: Consumer BehaviorBudg

37、et ConstraintsThe Budget LineThe slope indicates the rate at which the two goods can be substituted without changing the amount of money spent.54Chapter 3: Consumer BehaviorBudget ConstraintsThe Budget LineThe vertical intercept (I/PC), illustrates the maximum amount of C that can be purchased with

38、income I.The horizontal intercept (I/PF), illustrates the maximum amount of F that can be purchased with income I.55Chapter 3: Consumer BehaviorBudget ConstraintsThe Effects of Changes in Income and PricesIncome ChangesAn increase in income causes the budget line to shift outward, parallel to the or

39、iginal line (holding prices constant).56Chapter 3: Consumer BehaviorBudget ConstraintsThe Effects of Changes in Income and PricesIncome ChangesA decrease in income causes the budget line to shift inward, parallel to the original line (holding prices constant).57Chapter 3: Consumer BehaviorBudget Con

40、straintsFood(units per week)Clothing(unitsper week)8012016040204060800A increase inincome shiftsthe budget lineoutward(I = $160)L2(I = $80)L1L3(I =$40)A decrease inincome shiftsthe budget lineinward58Chapter 3: Consumer BehaviorBudget ConstraintsThe Effects of Changes in Income and PricesPrice Chang

41、esIf the price of one good increases, the budget line shifts inward, pivoting from the other goods intercept.59Chapter 3: Consumer BehaviorBudget ConstraintsThe Effects of Changes in Income and PricesPrice ChangesIf the price of one good decreases, the budget line shifts outward, pivoting from the o

42、ther goods intercept.60Chapter 3: Consumer BehaviorBudget ConstraintsFood(units per week)Clothing(unitsper week)801201604040(PF = 1)L1An increase in theprice of food to$2.00 changesthe slope of thebudget line androtates it inward.L3(PF = 2)(PF = 1/2)L2A decrease in theprice of food to$.50 changesthe

43、 slope of thebudget line androtates it outward.61Chapter 3: Consumer BehaviorBudget ConstraintsThe Effects of Changes in Income and PricesPrice ChangesIf the two goods increase in price, but the ratio of the two prices is unchanged, the slope will not change.62Chapter 3: Consumer BehaviorBudget Cons

44、traintsThe Effects of Changes in Income and PricesPrice ChangesHowever, the budget line will shift inward to a point parallel to the original budget line.63Chapter 3: Consumer BehaviorBudget ConstraintsThe Effects of Changes in Income and PricesPrice ChangesIf the two goods decrease in price, but th

45、e ratio of the two prices is unchanged, the slope will not change.64Chapter 3: Consumer BehaviorBudget ConstraintsThe Effects of Changes in Income and PricesPrice ChangesHowever, the budget line will shift outward to a point parallel to the original budget line.65Chapter 3: Consumer BehaviorConsumer

46、 ChoiceConsumers choose a combination of goods that will maximize the satisfaction they can achieve, given the limited budget available to them.66Chapter 3: Consumer BehaviorConsumer ChoiceThe maximizing market basket must satisfy two conditions:1) It must be located on the budget line.2) Must give

47、the consumer the most preferred combination of goods and services.67Chapter 3: Consumer BehaviorRecall, the slope of an indifference curve is:Consumer ChoiceFurther, the slope of the budget line is:68Chapter 3: Consumer BehaviorConsumer ChoiceTherefore, it can be said that satisfaction is maximized

48、where: 69Chapter 3: Consumer BehaviorConsumer ChoiceIt can be said that satisfaction is maximized when marginal rate of substitution (of F and C) is equal to the ratio of the prices (of F and C).70Chapter 3: Consumer BehaviorConsumer ChoiceFood (units per week)Clothing(units per week)4080202030400U1

49、BBudget LinePc = $2 Pf = $1 I = $80Point B does not maximize satisfaction because theMRS (-(-10/10) = 1 is greater than the price ratio (1/2).-10C+10F71Chapter 3: Consumer BehaviorConsumer ChoiceBudget LineU3DMarket basket D cannot be attainedgiven the currentbudget constraint.Pc = $2 Pf = $1 I = $8

50、0Food (units per week)Clothing(units per week)408020203040072Chapter 3: Consumer BehaviorU2Consumer ChoicePc = $2 Pf = $1 I = $80Budget LineAAt market basket A the budget line and theindifference curve aretangent and no higherlevel of satisfaction can be attained.At A:MRS =Pf/Pc = .5Food (units per

51、week)Clothing(units per week)408020203040073Chapter 3: Consumer BehaviorConsumer ChoiceConsider two groups of consumers, each wishing to spend $10,000 on the styling and performance of cars.Each group has different preferences.Designing New Automobiles (II)74Chapter 3: Consumer BehaviorConsumer Choi

52、ceBy finding the point of tangency between a groups indifference curve and the budget constraint auto companies can design a production and marketing plan.Designing New Automobiles (II)75Chapter 3: Consumer BehaviorDesigning New Automobiles (II)StylingPerformance$10,000$10,000$3,000These consumersar

53、e willing to tradeoff a considerableamount of stylingfor some additionalperformance$7,00076Chapter 3: Consumer BehaviorDesigning New Automobiles (II)Styling$10,000$10,000$3,000These consumersare willing to tradeoff a considerableamount of performance forsome additionalstyling$7,000Performance77Chapt

54、er 3: Consumer BehaviorConsumer ChoiceChoosing between a non-matching and matching grant to fund police expendituresDecision Making & Public Policy78Chapter 3: Consumer BehaviorConsumer ChoiceNon-matching GrantPoliceExpenditures ($)PrivateExpenditures ($)OPQU1ABefore Grant Budget line: PQA: Preferen

55、ce maximizing market basket ExpenditureOR: PrivateOS: PoliceRS79Chapter 3: Consumer BehaviorVTU3U1After Grant Budget line: TVB: Preference maximizing market basket ExpenditureOU: PrivateOZ: PoliceBUZRConsumer ChoiceNon-matching GrantPPoliceExpenditures ($)PrivateExpenditures ($)OSQA80Chapter 3: Cons

56、umer BehaviorPRU2TU1Consumer ChoiceMatching GrantPolice ($)PrivateExpenditures ($)OQSRBefore Grant Budget line: PQ A: Preference maximizing market basket After GrantC: Preference maximizing market basketExpendituresOW: PrivateOX: PoliceCXWA81Chapter 3: Consumer BehaviorTU3U1Nonmatching GrantPoint BO

57、U: Private expenditureOZ: Police expenditureMatching GrantPoint COW: Private expenditureOX: Police expenditureWXConsumer ChoiceMatching GrantPPolice ($)PrivateExpenditures ($)OQAU2CRBUZ82Chapter 3: Consumer BehaviorConsumer ChoiceA corner solution exists if a consumer buys in extremes, and buys all

58、of one category of good and none of another. This exists where the indifference curves are tangent to the horizontal and vertical axis.MRS is not equal to PA/PBA Corner Solution83Chapter 3: Consumer BehaviorA Corner SolutionIce Cream (cup/month)FrozenYogurt(cupsmonthly)BAU2U3U1A corner solutionexist

59、s at point B.84Chapter 3: Consumer BehaviorConsumer ChoiceA Corner SolutionAt point B, the MRS of ice cream for frozen yogurt is greater than the slope of the budget line.This suggests that if the consumer could give up more frozen yogurt for ice cream he would do so.However, there is no more frozen

60、 yogurt to give up!85Chapter 3: Consumer BehaviorConsumer ChoiceA Corner SolutionWhen a corner solution arises, the consumers MRS does not necessarily equal the price ratio.In this instance it can be said that:86Chapter 3: Consumer BehaviorConsumer ChoiceA Corner SolutionIf the MRS is, in fact, sign