Work with our Managerial Economics tutor in London for MG207 course at LSE. We have tutors available for Microeconomics I, Microeconomics II, Principles of Microeconomics and Micro theory.
Consumer Preferences
A consumer’s choice of what bundle to consume determines her product-level demand at the given prices.
Choice reflects preferences under constraints. We need a way to represent preferences, and then combine this information with other information about the constraints.
Analysis of these two sides of the problem allows us to derive consumer demand.
A preference relation that is complete, reflexive, and transitive can be represented by a continuous utility function. Continuity means that small changes to a consumption bundle cause only small changes to the preference level.
An indifference curve contains equally preferred bundles. Equal preference ⇒ same utility level. Therefore, all bundles in an indifference curve have the same utility level. So the bundles (4,1) and (2,2) are in the indifference curve with utility level U ≡ 4
Utility Maximization
The most preferred affordable bundle is called the consumer’s ORDINARY DEMAND at the given prices and budget. Ordinary demands will be denoted by x1*(p1,p2,m) and x2*(p1,p2,m). When x1* > 0 and x2* > 0 the demanded bundle is INTERIOR. the slope of the budget constraint, -p1/p2, and the slope of the indifference curve containing (x1*,x2*) are equal at (x1*,x2*).
The study of how ordinary demands x1*(p1,p2,m) and x2*(p1,p2,m) change as prices p1, p2, and income, m, change.
The curve containing all the utility-maximizing bundles traced out as p1 changes, with p2 and m constant, is the p1- price offer curve.
The plot of the x1-coordinate of the p1- price offer curve against p1 is the ordinary demand curve for commodity 1.
Other popular courses:
-
- Intermediate Microeconomics tutors
- Intermediate Macroeconomics tutors
- EC201 Microeconomics Principles tutor
- EC210 Macroeconomic Principles
- EC220 Introduction to Econometrics
- EC221 Principles of Econometrics
- EC230 Public Policy
- MG205 Econometrics Theory and Applications
- FM212 Principles of Finance
- FM473 Financial Markets
- FM474 Managerial Finance
- Econometrics Tutors
- Money and Banking
- Finance Tutors
- Reviews
- Book a free lesson with our Managerial Economics tutor in London for LSE MG207.
