Economics of Consumption: Understanding Consumer Behavior and Optimal Choices, Slides of Economic Analysis

Download Economics of Consumption: Understanding Consumer Behavior and Optimal Choices and more Slides Economic Analysis in PDF only on Docsity! Making Consumption Choices EXHIBIT { 3.1 | Basket of Goods Rootes a 7 5 & 5 A 4 a 3 c DB 1 O 123 45 &7F 8 @ . Ey: Each pont on the graph reprasents a basket containing a cortaln numberof e9gs and a certain Tumber of root Gear. For ecemple, point A ooresponde bo 3 egge and & root Beene, Docsity.com Comparing Baskets EXHIBIT Ea Comparing Baskets pm 2.2 | Docsity.com The Budget Line EXHIBIT [a7 | The Budget Line i ry " t x The consumer's budget line depichs the varlous Gaskets that he oan alford with hie income (® Docsity.com Consumer's Optimum EXHIBIT The Consumer's Optimum ® Docsity.com Validity of Corner Solution EXHIBIT E- Corner Solution ® Docsity.com New Optimum EXHIBIT [3.13] Finding the New Optimum 5 x B The dashed Indifference curses in panel.A cannot be comect, because they orees the indiffarsnos curva through ©. The only comet way bo draw an indifernos curse tangent to tha caw budget Ine ie wih Ihe langenoy between 4and © ata point ike PF, asin pana B The now Indifference curve Ie gher than the old ons, so you are better olf at the mew optimum [hen necens ir fly 3 Docsity.com Consumer Tastes and Preferences EXHIBIT Comparing Preferences pews " Fomatoss AL One poselbiltty BL Another posed bility li Pons! A, Albert's indifference curva (hangent at 4) must ovantually cree Betty's IndPerence cure (hangent at 2 Thorofors, Albert and Batty cannot possibly have ihe some togtae. in pane B, thes Indifferanos curves might or might net corde and Albert ond Belly might or might net hava identical laches. ® Docsity.com Income Tax and Head Tax EXHIBIT [3.14] 14 An Income Tas wersus a Head Tas Panel 4A shows your anigingy Qunbasad) bucgel Ing and your iecome Ger budget ing. The oplimum or the fncome far Ing Isak P, where your aflarbax Income Ie 0. Pang EB eshows the Sead fay budget ling, whioh les a vertical distino $50 balow tha onigpiny budget Ing end consequently pagsos Through point © The optimum on the Seas fax line must be at o like © bebwean PF and and thle consequenty on a higher indifarsnog curva. The heed bax le nt ae Preferable to the Income bax 3 Docsity.com