This document provides an overview of household behavior and consumer choice. It discusses how households make decisions in output and input markets, including how they allocate income based on utility maximization given budget constraints. Key concepts covered include demand determinants, budget constraints, utility, marginal utility, income and substitution effects, consumer surplus, labor supply decisions, and the price of leisure. Household choices are influenced by income, prices, preferences, and opportunity costs.
This document summarizes key concepts from Chapter 5 of the textbook "Principles of Economics, 6th edition" by Karl Case and Ray Fair. It discusses household behavior and consumer choice. Specifically, it covers how households make decisions about demand for goods, labor supply, and savings. It introduces the concepts of budget constraints, opportunity costs, utility, and the utility-maximizing rule for consumers to allocate expenditures between goods in a way that equalizes marginal utility per dollar spent. Diminishing marginal utility and its impact on total utility is also summarized.
A price ceiling below the equilibrium rent for housing leads to a shortage of housing. This creates inefficiencies as search activity and black markets emerge to allocate the scarce housing. A rent ceiling results in an inefficient underproduction of housing and deadweight loss to society.
Classical welfare economics did not have a specific theory of economic welfare. Theorists like Adam Smith, David Ricardo, and J.S. Mill associated improvements in welfare with reducing the sacrifices required to produce goods and the labor hours needed per unit of output. Alfred Marshall developed marginalist welfare economics based on the concept of consumer surplus. He defined consumer surplus as the excess of what a consumer would be willing to pay for a good over the actual price paid, representing surplus satisfaction. Marshall saw aggregate consumer surplus as the sum of individual surpluses and as a measure of overall economic welfare.
This document discusses price and output determination under monopolistic competition. It contains the following key points:
1. Firms under monopolistic competition aim to maximize profits by adjusting price and output based on demand and cost conditions.
2. Individual firm equilibrium occurs where marginal revenue equals marginal cost, allowing the firm to make supernormal profits or losses depending on demand and costs.
3. Group equilibrium results from the interaction of many firms producing close substitutes, with uniform demand and cost curves across the industry leading to an equilibrium with normal profits.
This document provides an overview and outline of key topics in microeconomics that will be covered in the textbook. It introduces microeconomics and defines its scope, discusses the themes of tradeoffs, prices and markets, theories and models, and positive versus normative analysis. It also defines what a market is, explores real versus nominal prices, and discusses why microeconomics is important to study, using examples of corporate decision making and public policy design.
Case study 9.1 - Responding to the growth in Lone person households in Austra...alicescott14
The proportion of lone-person households in Australia has risen significantly from 19.3% in 1991 to 25.29% in 2011 and is projected to reach 28% by 2031. This growth is driven by factors like population aging, people delaying marriage, and relationship breakdowns. As families get smaller but more numerous, marketers must adjust strategies to target lone-person households, whose consumer decision-making and demands for certain goods and services differ from families. Reference groups like friends become more influential than family for purchasing decisions. Marketers can utilize these reference groups and focus on themes of freedom and flexibility to appeal to these consumers.
1. The document discusses issues related to defining the concept of "household" for data collection purposes such as censuses and surveys.
2. Household definitions aim to balance practical needs of data collection with accurately representing social realities, but may misrepresent some subgroups.
3. Interviews with data professionals revealed that while operational definitions are clear, users are often unaware of definition issues, and accurate representation of concepts like household is challenging.
This document summarizes key concepts from Chapter 5 of the textbook "Principles of Economics, 6th edition" by Karl Case and Ray Fair. It discusses household behavior and consumer choice. Specifically, it covers how households make decisions about demand for goods, labor supply, and savings. It introduces the concepts of budget constraints, opportunity costs, utility, and the utility-maximizing rule for consumers to allocate expenditures between goods in a way that equalizes marginal utility per dollar spent. Diminishing marginal utility and its impact on total utility is also summarized.
A price ceiling below the equilibrium rent for housing leads to a shortage of housing. This creates inefficiencies as search activity and black markets emerge to allocate the scarce housing. A rent ceiling results in an inefficient underproduction of housing and deadweight loss to society.
Classical welfare economics did not have a specific theory of economic welfare. Theorists like Adam Smith, David Ricardo, and J.S. Mill associated improvements in welfare with reducing the sacrifices required to produce goods and the labor hours needed per unit of output. Alfred Marshall developed marginalist welfare economics based on the concept of consumer surplus. He defined consumer surplus as the excess of what a consumer would be willing to pay for a good over the actual price paid, representing surplus satisfaction. Marshall saw aggregate consumer surplus as the sum of individual surpluses and as a measure of overall economic welfare.
This document discusses price and output determination under monopolistic competition. It contains the following key points:
1. Firms under monopolistic competition aim to maximize profits by adjusting price and output based on demand and cost conditions.
2. Individual firm equilibrium occurs where marginal revenue equals marginal cost, allowing the firm to make supernormal profits or losses depending on demand and costs.
3. Group equilibrium results from the interaction of many firms producing close substitutes, with uniform demand and cost curves across the industry leading to an equilibrium with normal profits.
This document provides an overview and outline of key topics in microeconomics that will be covered in the textbook. It introduces microeconomics and defines its scope, discusses the themes of tradeoffs, prices and markets, theories and models, and positive versus normative analysis. It also defines what a market is, explores real versus nominal prices, and discusses why microeconomics is important to study, using examples of corporate decision making and public policy design.
Case study 9.1 - Responding to the growth in Lone person households in Austra...alicescott14
The proportion of lone-person households in Australia has risen significantly from 19.3% in 1991 to 25.29% in 2011 and is projected to reach 28% by 2031. This growth is driven by factors like population aging, people delaying marriage, and relationship breakdowns. As families get smaller but more numerous, marketers must adjust strategies to target lone-person households, whose consumer decision-making and demands for certain goods and services differ from families. Reference groups like friends become more influential than family for purchasing decisions. Marketers can utilize these reference groups and focus on themes of freedom and flexibility to appeal to these consumers.
1. The document discusses issues related to defining the concept of "household" for data collection purposes such as censuses and surveys.
2. Household definitions aim to balance practical needs of data collection with accurately representing social realities, but may misrepresent some subgroups.
3. Interviews with data professionals revealed that while operational definitions are clear, users are often unaware of definition issues, and accurate representation of concepts like household is challenging.
Week 12 Presentation- Coach reaches Asia's emerging middle class Narelle Martin
Week 12 Presentation
Coach reaches Asia's emerging middle class
BMA262 Consumer Behaviour
Assessment Item 1: Group Assignment
Natasha Ioannidis, Amanda James and Narelle Martin (134635)
This document discusses the concepts of scarcity, wants, and needs in economics. It begins by outlining three basic economic questions about what to produce, how to produce it, and for whom. It then defines key concepts like scarcity, choice, and opportunity cost. The document notes that resources are limited while wants and needs are unlimited, forcing societies to make choices. It explains that scarcity means not all goods and services can be produced, and that choices must be made between alternatives. The circular flow of the economy and production possibility frontier are also introduced. The document emphasizes that scarcity is a permanent reality and differs from shortages, which are temporary. It concludes by distinguishing between wants and needs from an economist's perspective.
BB Chapter Thirteen : Household Structure And Consumption BehaviorBBAdvisor
This document discusses household structures and consumption behaviors. It begins by defining different household types such as family households and non-family households. It then describes the household life cycle model and the different stages households typically go through, such as young singles, young married couples with and without children, middle-aged singles and couples with children at home or empty nests, and older singles and couples. Each life cycle stage is associated with unique consumption needs and purchasing behaviors. The document provides details about characteristics and expenditures for each life cycle stage.
1) A firm aims to minimize costs by producing a given output level using the smallest amount of inputs.
2) For a Cobb-Douglas production function, the firm's conditional input demand functions are derived by setting the slope of the isoquant equal to the slope of the isocost line.
3) The firm's total cost function is the sum of expenditures on each input using the conditional input demand functions.
This document discusses consumer learning and the key elements that drive it. It outlines the elements of learning as motivation, cues, response, and reinforcement. Motivation is based on needs and goals, while cues provide direction for motives and can include marketing strategies and advertising. Response is an individual's reaction that depends on previous learning. Reinforcement increases the likelihood of a specific response through classical conditioning, where stimuli are paired with outcomes to elicit known responses through repetition. The document uses examples like brand recognition to illustrate classical conditioning and cognitive learning concepts in marketing.
This document discusses production and cost concepts. It begins by listing learning outcomes related to production functions, costs, efficiency, and Cobb-Douglas production functions. It then covers short-run and long-run production functions, the law of diminishing returns, costs including total, average, and marginal costs, and the three stages of production. It provides examples of production functions and discusses the relationship between inputs and output as well as returns to scale.
The Markets for the Factors of ProductionChris Thomas
The document discusses labor markets and the markets for factors of production. It explains that:
1) Labor demand is derived from a firm's production function and decision to supply goods. Firms hire labor up to the point where the marginal product of an additional worker equals the wage.
2) Labor supply comes from individuals' choices about how much to work based on wages. Equilibrium in the labor market is reached at the wage where supply meets demand.
3) The prices of factors like capital and land are also determined by supply and demand in their respective markets. In all markets, factors earn their marginal product.
This document discusses basic economic concepts related to demand, supply, and market equilibrium. It defines key terms including firms, households, entrepreneurs, factors of production, and the circular flow of inputs and outputs. It explains the laws of demand and supply, how demand and supply curves illustrate the relationship between price and quantity, and how equilibrium is reached when quantity demanded equals quantity supplied. Determinants of demand and supply are also outlined.
Intro to Macroeconomics - Book VersionMark Anthony
This document provides an overview and outline of key concepts in macroeconomics. It discusses the three main concerns of macroeconomics as output growth, unemployment, and inflation/deflation. It also describes the key components of the macroeconomy including households, firms, government, and the rest of the world. Additionally, it outlines the three market arenas of goods and services, labor, and money. The role of government fiscal and monetary policy in macroeconomics is also summarized.
This document discusses how reference groups and families influence consumer behavior. It defines reference groups as people or social groups that influence an individual's values, attitudes, and behaviors. Celebrities, friends, and family are common reference groups used in advertising to communicate with target markets. The concept of family is explored, along with the socialization of family members and the roles families play in decision making. The family life cycle model outlines common stages families progress through, from bachelorhood to parenthood to dissolution. Reference groups and families are important for marketers to consider when trying to understand and influence consumer behavior.
Post-purchase dissonance is doubt or anxiety experienced after making a difficult purchase decision. Factors like the number of alternatives considered and substitutability of options can influence dissonance. Consumers may also regret purchases if the product fails to meet expectations or they find out foregone alternatives were better. Approaches to reduce dissonance include increasing desirability of the chosen brand and decreasing desirability of rejected brands. Satisfaction depends on expectations; focusing on satisfying customers totally is important for loyalty rather than immediate repurchase. Dissatisfied customers may still repurchase due to lack of alternatives, while satisfied customers may switch seeking better options.
This document discusses production functions and the factors that influence them. It defines key concepts like total product, average product, marginal product, and different types of production functions.
The short-run production function, known as the law of variable proportions, describes how output changes as one input varies while others are held fixed. It outlines the three stages of increasing, decreasing, and negative returns. The long-run production function examines how output changes as all inputs vary, governed by laws of returns to scale. Constant, increasing, and decreasing returns to scale are defined. Isoquants and the marginal rate of technical substitution are also explained. The document concludes by discussing how production functions inform managerial decision making.
The document discusses production theory, which forms the foundation of supply theory. It covers key concepts such as:
1) Short-run vs long-run production and the fixed and variable nature of inputs.
2) Production functions and the relationship between total, average, and marginal product.
3) The law of diminishing marginal returns and the three stages of production.
4) Isoquants, isocost lines, and how firms determine optimal input combinations to minimize costs.
Consumer learning is vital in creating Brand loyalty and Brand equity. In this presentation you will come to know about how people learn and what you should do as a company to make consumers learn about your product.
Influence of reference groups on consumer behaviourprabaharan b
This document discusses key factors and groups that influence consumer purchasing decisions. It identifies 5 main factors: buyer psychology, personal characteristics, social characteristics, culture, and groups. It then describes different types of reference groups that consumers use for normative and comparative guidance, such as family, friends, work colleagues, celebrities, and experts. The level of influence depends on attributes like a group's credibility, attractiveness, and power, as well as how conspicuous the product is.
The document discusses income inequality and poverty in the United States. It measures inequality using data that shows the richest 20% earn about 10 times as much as the poorest 20%. It also examines political philosophies around redistributing income, including utilitarianism supporting it, liberalism allowing for it as social insurance, and libertarianism opposing it. The document also analyzes policies to reduce poverty like minimum wage laws, welfare, negative income taxes, and in-kind transfers, noting each have unintended effects on work incentives.
Family and its Influence : Consumer BehaviorKaushik Deb
With the exception of those very few people who are classified as hermits, most individuals interact with other people on daily basis, especially with members of their own families. The family commonly provides the opportunity for product exposure and trial and imparts consumption values to its members. As a major consumption group, the family is also a prime target for many product and services.
The activity of seeking wealth is as old as Human
Civilization. Human beings either as individuals or as groups
or as large kingdoms and empires have always been engaged
in acquiring and increasing the material wealth.
However, a discipline study of the wealth producing
activities was commenced about 230 years back when Adam
Smith, the father of Economics, published “The Nature and
Causes of Wealth of Nations”. Economics, as a discipline,
constitute the most important subject to analyze activities
related to wealth creation and distribution. The dimensions of
the subject of Economics are truly vast and encompasses all
aspects of our lives.
Consumer Behaviour -Family, social class & life cyclerainbowlink
Family is defined as two or more related individuals living together. There are two types of households - family households consisting of related individuals, and institutional households like hostels. Families provide economic support, emotional support, social relationships, morals/values, and more. There are traditional family types like nuclear families and extended families, as well as new types like blended families and single parent families. A family's purchasing decisions are influenced by its stage in the family life cycle, which includes stages like newly married, parenthood, and post-parenthood. Roles in family decision making include influencers, deciders, buyers, and users. Decisions are made through processes like bargaining, authority, or reasoning.
This document discusses the concept of elasticity of demand in economics. It defines elasticity of demand as the percentage change in quantity demanded divided by the percentage change in a determinant of demand. The key determinants discussed are price, income, and the price of related goods. The document outlines different types of price elasticity including perfectly elastic, perfectly inelastic, relatively elastic, and relatively inelastic. It also discusses methods for measuring price elasticity including percentage, point, and arc methods. Finally, it covers income elasticity and cross elasticity as well as factors that influence elasticity and applications of elasticity concepts.
The document summarizes key concepts related to household behavior and consumer choice in microeconomics. It discusses households making decisions about demand for goods and labor supply based on budget constraints and utility maximization. Households choose consumption bundles that maximize total utility subject to the budget constraint. A rise in price or wage can impact consumption through income and substitution effects. Households also make choices about saving, borrowing, and allocating spending over present versus future periods.
This document provides an overview and outline of key concepts from a principles of economics textbook. It includes definitions of terms like perfect competition, homogeneous products, and perfect knowledge. It also outlines the chapters, including topics like household behavior and consumer choice, and how households make decisions in output and input markets. Diagrams and tables are included to illustrate concepts like the budget constraint, utility, and how households allocate income to maximize utility based on the principle of diminishing marginal utility.
Week 12 Presentation- Coach reaches Asia's emerging middle class Narelle Martin
Week 12 Presentation
Coach reaches Asia's emerging middle class
BMA262 Consumer Behaviour
Assessment Item 1: Group Assignment
Natasha Ioannidis, Amanda James and Narelle Martin (134635)
This document discusses the concepts of scarcity, wants, and needs in economics. It begins by outlining three basic economic questions about what to produce, how to produce it, and for whom. It then defines key concepts like scarcity, choice, and opportunity cost. The document notes that resources are limited while wants and needs are unlimited, forcing societies to make choices. It explains that scarcity means not all goods and services can be produced, and that choices must be made between alternatives. The circular flow of the economy and production possibility frontier are also introduced. The document emphasizes that scarcity is a permanent reality and differs from shortages, which are temporary. It concludes by distinguishing between wants and needs from an economist's perspective.
BB Chapter Thirteen : Household Structure And Consumption BehaviorBBAdvisor
This document discusses household structures and consumption behaviors. It begins by defining different household types such as family households and non-family households. It then describes the household life cycle model and the different stages households typically go through, such as young singles, young married couples with and without children, middle-aged singles and couples with children at home or empty nests, and older singles and couples. Each life cycle stage is associated with unique consumption needs and purchasing behaviors. The document provides details about characteristics and expenditures for each life cycle stage.
1) A firm aims to minimize costs by producing a given output level using the smallest amount of inputs.
2) For a Cobb-Douglas production function, the firm's conditional input demand functions are derived by setting the slope of the isoquant equal to the slope of the isocost line.
3) The firm's total cost function is the sum of expenditures on each input using the conditional input demand functions.
This document discusses consumer learning and the key elements that drive it. It outlines the elements of learning as motivation, cues, response, and reinforcement. Motivation is based on needs and goals, while cues provide direction for motives and can include marketing strategies and advertising. Response is an individual's reaction that depends on previous learning. Reinforcement increases the likelihood of a specific response through classical conditioning, where stimuli are paired with outcomes to elicit known responses through repetition. The document uses examples like brand recognition to illustrate classical conditioning and cognitive learning concepts in marketing.
This document discusses production and cost concepts. It begins by listing learning outcomes related to production functions, costs, efficiency, and Cobb-Douglas production functions. It then covers short-run and long-run production functions, the law of diminishing returns, costs including total, average, and marginal costs, and the three stages of production. It provides examples of production functions and discusses the relationship between inputs and output as well as returns to scale.
The Markets for the Factors of ProductionChris Thomas
The document discusses labor markets and the markets for factors of production. It explains that:
1) Labor demand is derived from a firm's production function and decision to supply goods. Firms hire labor up to the point where the marginal product of an additional worker equals the wage.
2) Labor supply comes from individuals' choices about how much to work based on wages. Equilibrium in the labor market is reached at the wage where supply meets demand.
3) The prices of factors like capital and land are also determined by supply and demand in their respective markets. In all markets, factors earn their marginal product.
This document discusses basic economic concepts related to demand, supply, and market equilibrium. It defines key terms including firms, households, entrepreneurs, factors of production, and the circular flow of inputs and outputs. It explains the laws of demand and supply, how demand and supply curves illustrate the relationship between price and quantity, and how equilibrium is reached when quantity demanded equals quantity supplied. Determinants of demand and supply are also outlined.
Intro to Macroeconomics - Book VersionMark Anthony
This document provides an overview and outline of key concepts in macroeconomics. It discusses the three main concerns of macroeconomics as output growth, unemployment, and inflation/deflation. It also describes the key components of the macroeconomy including households, firms, government, and the rest of the world. Additionally, it outlines the three market arenas of goods and services, labor, and money. The role of government fiscal and monetary policy in macroeconomics is also summarized.
This document discusses how reference groups and families influence consumer behavior. It defines reference groups as people or social groups that influence an individual's values, attitudes, and behaviors. Celebrities, friends, and family are common reference groups used in advertising to communicate with target markets. The concept of family is explored, along with the socialization of family members and the roles families play in decision making. The family life cycle model outlines common stages families progress through, from bachelorhood to parenthood to dissolution. Reference groups and families are important for marketers to consider when trying to understand and influence consumer behavior.
Post-purchase dissonance is doubt or anxiety experienced after making a difficult purchase decision. Factors like the number of alternatives considered and substitutability of options can influence dissonance. Consumers may also regret purchases if the product fails to meet expectations or they find out foregone alternatives were better. Approaches to reduce dissonance include increasing desirability of the chosen brand and decreasing desirability of rejected brands. Satisfaction depends on expectations; focusing on satisfying customers totally is important for loyalty rather than immediate repurchase. Dissatisfied customers may still repurchase due to lack of alternatives, while satisfied customers may switch seeking better options.
This document discusses production functions and the factors that influence them. It defines key concepts like total product, average product, marginal product, and different types of production functions.
The short-run production function, known as the law of variable proportions, describes how output changes as one input varies while others are held fixed. It outlines the three stages of increasing, decreasing, and negative returns. The long-run production function examines how output changes as all inputs vary, governed by laws of returns to scale. Constant, increasing, and decreasing returns to scale are defined. Isoquants and the marginal rate of technical substitution are also explained. The document concludes by discussing how production functions inform managerial decision making.
The document discusses production theory, which forms the foundation of supply theory. It covers key concepts such as:
1) Short-run vs long-run production and the fixed and variable nature of inputs.
2) Production functions and the relationship between total, average, and marginal product.
3) The law of diminishing marginal returns and the three stages of production.
4) Isoquants, isocost lines, and how firms determine optimal input combinations to minimize costs.
Consumer learning is vital in creating Brand loyalty and Brand equity. In this presentation you will come to know about how people learn and what you should do as a company to make consumers learn about your product.
Influence of reference groups on consumer behaviourprabaharan b
This document discusses key factors and groups that influence consumer purchasing decisions. It identifies 5 main factors: buyer psychology, personal characteristics, social characteristics, culture, and groups. It then describes different types of reference groups that consumers use for normative and comparative guidance, such as family, friends, work colleagues, celebrities, and experts. The level of influence depends on attributes like a group's credibility, attractiveness, and power, as well as how conspicuous the product is.
The document discusses income inequality and poverty in the United States. It measures inequality using data that shows the richest 20% earn about 10 times as much as the poorest 20%. It also examines political philosophies around redistributing income, including utilitarianism supporting it, liberalism allowing for it as social insurance, and libertarianism opposing it. The document also analyzes policies to reduce poverty like minimum wage laws, welfare, negative income taxes, and in-kind transfers, noting each have unintended effects on work incentives.
Family and its Influence : Consumer BehaviorKaushik Deb
With the exception of those very few people who are classified as hermits, most individuals interact with other people on daily basis, especially with members of their own families. The family commonly provides the opportunity for product exposure and trial and imparts consumption values to its members. As a major consumption group, the family is also a prime target for many product and services.
The activity of seeking wealth is as old as Human
Civilization. Human beings either as individuals or as groups
or as large kingdoms and empires have always been engaged
in acquiring and increasing the material wealth.
However, a discipline study of the wealth producing
activities was commenced about 230 years back when Adam
Smith, the father of Economics, published “The Nature and
Causes of Wealth of Nations”. Economics, as a discipline,
constitute the most important subject to analyze activities
related to wealth creation and distribution. The dimensions of
the subject of Economics are truly vast and encompasses all
aspects of our lives.
Consumer Behaviour -Family, social class & life cyclerainbowlink
Family is defined as two or more related individuals living together. There are two types of households - family households consisting of related individuals, and institutional households like hostels. Families provide economic support, emotional support, social relationships, morals/values, and more. There are traditional family types like nuclear families and extended families, as well as new types like blended families and single parent families. A family's purchasing decisions are influenced by its stage in the family life cycle, which includes stages like newly married, parenthood, and post-parenthood. Roles in family decision making include influencers, deciders, buyers, and users. Decisions are made through processes like bargaining, authority, or reasoning.
This document discusses the concept of elasticity of demand in economics. It defines elasticity of demand as the percentage change in quantity demanded divided by the percentage change in a determinant of demand. The key determinants discussed are price, income, and the price of related goods. The document outlines different types of price elasticity including perfectly elastic, perfectly inelastic, relatively elastic, and relatively inelastic. It also discusses methods for measuring price elasticity including percentage, point, and arc methods. Finally, it covers income elasticity and cross elasticity as well as factors that influence elasticity and applications of elasticity concepts.
The document summarizes key concepts related to household behavior and consumer choice in microeconomics. It discusses households making decisions about demand for goods and labor supply based on budget constraints and utility maximization. Households choose consumption bundles that maximize total utility subject to the budget constraint. A rise in price or wage can impact consumption through income and substitution effects. Households also make choices about saving, borrowing, and allocating spending over present versus future periods.
This document provides an overview and outline of key concepts from a principles of economics textbook. It includes definitions of terms like perfect competition, homogeneous products, and perfect knowledge. It also outlines the chapters, including topics like household behavior and consumer choice, and how households make decisions in output and input markets. Diagrams and tables are included to illustrate concepts like the budget constraint, utility, and how households allocate income to maximize utility based on the principle of diminishing marginal utility.
This document discusses microeconomics and consumer behavior topics including utility maximization, demand, and consumer choice. It defines key concepts like total utility, marginal utility, and the law of diminishing marginal utility. It provides examples to illustrate these concepts and how consumers make choices to maximize their utility subject to budget constraints. Rational consumers will allocate their limited income between goods in a way that equalizes the marginal utility per dollar between each good. The document also discusses substitution and income effects that occur when prices change.
This document provides an overview of household behavior and consumer choice. It discusses how households make three basic decisions: how much of each product to demand, how much labor to supply, and how much to save versus spend. Households face budget constraints determined by income, prices, and wealth. They seek to maximize utility subject to these constraints. When prices change, this creates both income and substitution effects that impact demand. Households also make labor supply decisions based on wage rates and their preferences between work and leisure.
The circular flow diagram shows the flow of money between households and firms through input and output markets. Firms purchase inputs from households and sell outputs to households. Households purchase goods and services from firms using income received from supplying inputs.
Elasticity measures the responsiveness of quantity demanded or supplied to a change in its price. Elastic demand means quantity demanded changes proportionally more than a price change. Inelastic demand means quantity demanded changes less than proportionally to a price change.
Consumer choice is based on utility maximization subject to a budget constraint. Indifference curves illustrate combinations of goods that provide equal utility. Utility maximizes where the highest indifference curve is tangent to the budget constraint.
The housing market in New York City is highly regulated, issuing a small number of permits for new condominium buildings. This has resulted in rapidly rising condominium prices as demand has grown. The chapter discusses market efficiency and government intervention. It explains how the market equilibrium maximizes total surplus when there are no externalities, perfect information, and perfect competition. Government policies like price controls and import restrictions can decrease total surplus and cause inefficiency in the market.
The housing market in New York City is highly regulated, issuing a small number of permits for new condominium buildings. This has resulted in rapidly rising condominium prices as demand has grown. The chapter discusses market efficiency and government intervention. It explains how the market equilibrium maximizes total surplus when there are no externalities, perfect information, and perfect competition. Government policies like price controls and import restrictions can decrease total surplus and cause inefficiency in the market.
This document provides a summary of key concepts related to demand, supply, and market equilibrium. It discusses firms and households as decision makers, and how they interact in input and output markets through the circular flow. It then explains the laws of demand and supply, how quantity demanded and supplied change with price, and how demand and supply curves are derived from individual decisions in the market. Other determinants of demand and supply are also outlined.
This document provides an overview of the key topics that will be covered in a basic economics workshop, including:
- Introduction to microeconomics and macroeconomics concepts like supply and demand, markets, and economic growth.
- The nature of scarcity and how it requires individuals and societies to make choices that involve opportunity costs.
- Production possibilities frontiers and how resources constraints impact what combinations of goods can be produced.
- Distinguishing between microeconomic topics like demand, supply, and elasticity from macroeconomic topics like inflation and GDP.
- Differences between production in the short-run, when some resources are fixed, versus the long-run when all resources are variable.
This document provides an overview of topics that will be covered in a basic economics workshop, including:
- Introduction to microeconomics and macroeconomics concepts like supply and demand, markets, and economic growth.
- Key economic principles such as scarcity, opportunity cost, production possibilities frontiers, and the differences between planned, market and mixed economies.
- Microeconomic concepts including demand and supply curves, elasticity, and the differences between short-run and long-run production.
- Short-run cost concepts including total, average and marginal costs, and the relationship between costs and output based on returns to scale.
- Long-run costs and the potential for economies of scale, dise
The document discusses consumer surplus, producer surplus, and how free markets can allocate resources efficiently. It defines consumer surplus as the difference between what buyers are willing to pay and what they actually pay, and producer surplus as the difference between what sellers receive and their costs. The market equilibrium maximizes the total surplus, or sum of consumer and producer surplus, representing an efficient allocation. However, market power and externalities can cause markets to fail to allocate resources efficiently.
This chapter brings together the basic ideas of consumer demand, and the production and cost concerns. This chapter will enable students to understand how price is determined in a market and the role of price.
Economics mc conell brue ch 21 study questionsHaroon Ahmed
This document provides answers to end-of-chapter questions about consumer behavior and utility maximization. It discusses key concepts like the law of demand, diminishing marginal utility, and how consumers allocate expenditures to maximize total utility based on marginal utility per dollar spent. For example, one question is answered by calculating the marginal utility per dollar spent on different goods and determining the quantities that equalize this ratio, maximizing the consumer's total utility. The document also discusses how time can be incorporated into consumer decision making and concepts like economic growth and rational decision making.
The document summarizes key concepts about monopoly market structure:
1) A monopoly is characterized by a single seller, significant barriers to entry, and no close substitutes for the product. It faces a downward-sloping demand curve and can influence prices.
2) In the short-run, a monopoly will produce where marginal revenue equals marginal cost to maximize profits, earning normal profits, supernormal profits, or losses.
3) In the long-run, the monopoly may adjust its scale of production to maximize profits or minimize losses. It can earn economic profits but also imposes social costs like deadweight loss.
4) The document also discusses price discrimination, where a monopoly charges different prices for
The document summarizes key concepts about monopoly market structure:
1) A monopoly is characterized by a single seller, significant barriers to entry, and no close substitutes for the product. It faces a downward-sloping demand curve and sets price to maximize profit.
2) In the short-run, a monopoly will produce where marginal revenue equals marginal cost to maximize profits, earning normal profits, supernormal profits, or losses.
3) In the long-run, the monopoly may adjust its scale of production to maximize profits or minimize losses. It can potentially earn economic profits in the long-run through barriers to entry.
4) A monopoly also creates deadweight loss and may engage in rent
This document provides an overview of demand, supply, and market equilibrium. It defines key concepts such as firms, households, input and output markets, and the circular flow of the economy. It discusses the determinants of demand and supply, including price and income. It explains the laws of demand and supply, how demand and supply curves are derived, and how equilibrium is reached through market interactions between buyers and sellers.
The document discusses key concepts in microeconomics including scarcity, opportunity cost, comparative advantage, costs of production, determinants of demand and supply, price elasticity, and how equilibrium price and quantity are affected by shifts in supply and demand. It provides learning objectives, definitions, examples, and tables to illustrate these concepts for a principles of microeconomics course.
This document provides an overview of key economic concepts related to scarcity and choice. It discusses how scarcity leads to opportunity costs and tradeoffs in both individual and societal decision making. Key models introduced include the production possibility frontier to illustrate scarcity and efficiency and comparative advantage to show how trade allows gains from specialization. Economic systems are explored, including command, market, and mixed systems, with markets emerging as the mechanism for coordinating production and distribution in free market economies.
1. The document discusses the fundamentals of demand and supply, including defining demand with a demand curve, the determinants of demand, and the difference between a shift in demand versus movement along a demand curve.
2. It explains that a demand curve slopes downward due to the law of demand and the law of diminishing marginal utility - as price increases, quantity demanded decreases.
3. The main determinants of demand are price of the good, income, tastes, prices of substitutes and complements, and expectations about future prices and income. A change in a determinant causes the demand curve to shift, while a change in price results in movement along the
This document provides an overview of concepts related to income distribution and poverty. It discusses key topics such as the sources of household income including wages, property income, and government transfers. It also covers the distribution of income and wealth in the US, measures of inequality like the Lorenz curve and Gini coefficient, the concept of poverty, and debates around redistribution policies including arguments for and against redistribution and examples of major redistribution programs.
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This document provides an overview of capital, investment, and the capital market. It defines capital as goods used to produce other goods and services over time. It distinguishes different types of capital and discusses investment, depreciation, and the role of financial markets in facilitating the flow of savings from households to firms seeking capital. The capital market allows households' savings to be channeled to the most profitable investment opportunities through interest rates and returns on stocks and bonds. Firms evaluate potential investments by comparing their expected rates of return to market interest rates.
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This document discusses the concept of general equilibrium and the efficiency of perfect competition. It introduces general equilibrium analysis and defines key terms like efficiency. It discusses how technological changes can affect markets and the concept of market adjustment. It then covers allocative efficiency under perfect competition and conditions for Pareto efficiency. The document notes that while perfect competition leads to efficiency, real markets often involve imperfections that can cause market failures.
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This document provides an overview of key concepts related to market failures including externalities, public goods, imperfect information, and social choice. It discusses how externalities can lead to inefficient market outcomes when private costs differ from social costs. Public goods are also prone to underprovision in free markets due to non-excludability and non-rivalry. Imperfect information can result in adverse selection and moral hazard. The document outlines various economic approaches to addressing these market failures.
The document discusses monopoly and antitrust policy. It defines concepts related to imperfect competition and market power, including industry boundaries, barriers to entry, and price discrimination. It then examines the social costs of monopoly like inefficiency and rent-seeking behavior. Finally, it outlines the development of antitrust law and policies in the US, including landmark acts like the Sherman Act and Clayton Act that aim to remedy monopolies and promote competition.
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This document discusses different types of elasticity, including price elasticity of demand, income elasticity of demand, cross-price elasticity of demand, and elasticity of supply. It defines these concepts and explains how to calculate elasticity using percentage changes. Factors that determine demand elasticity include availability of substitutes, budget share of the product, and the time period considered. Elasticity can change along a demand curve and affects total revenue from price changes.
The document discusses how markets allocate resources through price rationing. When demand exceeds supply, the price rises until they are equal. This rationing mechanism allocates the good to those willing to pay the highest price. The document also discusses alternative rationing mechanisms used by governments and firms and how they create inefficiencies and unintended costs and benefits. It further explains how competitive markets maximize the sum of consumer and producer surplus through supply and demand interactions.
This document provides an overview and introduction to the scope and method of economics. It discusses the following key points in 3 sentences:
Economics is the study of how individuals and societies make choices with scarce resources. The document outlines why economics is studied, including to learn a way of thinking, understand society and global affairs, and be an informed voter. It also describes the scope of economics in terms of microeconomics, macroeconomics, and diverse fields, as well as the method which involves theories, models, and empirical testing of economic concepts.
This document contains notes from several coding sessions that cover various Python concepts:
1. Strings are immutable objects, so string functions return new strings rather than modifying the original. Common string functions include lower(), capitalize(), strip(), replace(), split(), and join().
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4. Dictionaries are mutable objects that store key-value pairs and are accessed using square bracket notation. They are considered unordered
The document provides instructions and examples for homework problems involving functions that manipulate lists, find the second largest element in a list, and calculate the value of sin(x) using a power series approximation by filling in blanks in code snippets. Sample outputs are given for some problems and it is noted that solutions may use fewer blanks than provided or alternative more elegant solutions.
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This presentation includes basic of PCOS their pathology and treatment and also Ayurveda correlation of PCOS and Ayurvedic line of treatment mentioned in classics.
2. Chapter Outline 6 Household Behavior and Consumer Choice Household Choice in Output Markets The Determinants of Household Demand The Budget Constraint The Basis of Choice: Utility Diminishing Marginal Utility Allocating Income to Maximize Utility The Utility-Maximizing Rule Diminishing Marginal Utility and Downward-Sloping Demand Income and Substitution Effects The Income Effect The Substitution Effect Consumer Surplus Household Choice in Input Markets The Labor Supply Decision The Price of Leisure Income and Substitution Effects of a Wage Change Saving and Borrowing: Present versus Future Consumption A Review: Households in Output and Input Markets Appendix: Indifference Curves PART II FOUNDATIONS OF MICROECONOMICS: CONSUMERS AND FIRMS
4. HOUSEHOLD BEHAVIOR AND CONSUMER CHOICE FIGURE 6.2 Understanding the Microeconomy and the Role of Government
5. HOUSEHOLD BEHAVIOR AND CONSUMER CHOICE Assumptions perfect competition An industry structure in which there are many firms, each small relative to the industry and producing virtually identical products, and in which no firm is large enough to have any control over prices. homogeneous products Undifferentiated outputs; products that are identical to, or indistinguishable from, one another.
6. HOUSEHOLD BEHAVIOR AND CONSUMER CHOICE perfect knowledge The assumption that households possess a knowledge of the qualities and prices of everything available in the market and that firms have all available information concerning wage rates, capital costs, and output prices. Much of the economic analysis in the chapters that follow applies to all forms of market structure. Indeed, much of the power of economic reasoning is that it is quite general. As we continue in microeconomics, in Chapter 13 we will define and explore several different kinds of market organization and structure, including monopoly, oligopoly, and monopolistic competition. Because monopolists, oligopolists, monopolistic competitors, and perfect competitors share the objective of maximizing profits, it should not be surprising that their behavior is in many ways similar. We focus here on perfect competition because many of these basic principles are easier to learn in the simplest of cases first.
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8. HOUSEHOLD CHOICE IN OUTPUT MARKETS THE DETERMINANTS OF HOUSEHOLD DEMAND Several factors influence the quantity of a given good or service demanded by a single household: ■ The price of the product ■ The income available to the household ■ The household’s amount of accumulated wealth ■ The prices of other products available to the household ■ The household’s tastes and preferences ■ The household’s expectations about future income, wealth, and prices
9. HOUSEHOLD CHOICE IN OUTPUT MARKETS THE BUDGET CONSTRAINT Information on household income and wealth, together with information on product prices, makes it possible to distinguish those combinations of goods and services that are affordable from those that are not. budget constraint The limits imposed on household choices by income, wealth, and product prices.
10. HOUSEHOLD CHOICE IN OUTPUT MARKETS choice set or opportunity set The set of options that is defined and limited by a budget constraint. AVAILABLE? 1,000 700 600 $ 400 MONTHLY RENT No 1,200 100 100 D Yes 1,000 150 150 C Yes 1,000 200 200 B Yes $1,000 TOTAL $350 OTHER EXPENSES $250 A FOOD OPTION TABLE 6.1 Possible Budget Choices of a Person Earning $1,000 Per Month After Taxes
11. HOUSEHOLD CHOICE IN OUTPUT MARKETS Preferences, Tastes, Trade-Offs, and Opportunity Cost Preferences play a key role in determining demand. Some people like the blues or jazz, some like classical, while others love country music. As long as a household faces a limited budget—and all households ultimately do—the real cost of any good or service is the value of the other goods and services that could have been purchased with the same amount of money. The real cost of a good or service is its opportunity cost, and opportunity cost is determined by relative prices.
12. HOUSEHOLD CHOICE IN OUTPUT MARKETS FIGURE 6.3 Budget Constraint and Opportunity Set for Ann and Tom The Budget Constraint More Formally
13. HOUSEHOLD CHOICE IN OUTPUT MARKETS real income Set of opportunities to purchase real goods and services available to a household as determined by prices and money income.
14. HOUSEHOLD CHOICE IN OUTPUT MARKETS THE EQUATION OF THE BUDGET CONSTRAINT In general, the budget constraint can be written: P X X + P Y Y = I, where P X = the price of X, X = the quantity of X consumed, P Y = the price of Y, Y = the quantity of Y consumed, and I = household income.
15. HOUSEHOLD CHOICE IN OUTPUT MARKETS FIGURE 6.4 The Effect of a Decrease in Price on Ann and Tom’s Budget Constraint Budget Constraints Change When Prices Rise or Fall The budget constraint is defined by income, wealth, and prices. Within those limits, households are free to choose, and the household’s ultimate choice depends on its own likes and dislikes.
16. THE BASIS OF CHOICE: UTILITY utility The satisfaction, or reward, a product yields relative to its alternatives. The basis of choice.
17. THE BASIS OF CHOICE: UTILITY marginal utility ( MU ) The additional satisfaction gained by the consumption or use of one more unit of something. DIMINISHING MARGINAL UTILITY total utility The total amount of satisfaction obtained from consumption of a good or service. law of diminishing marginal utility The more of any one good consumed in a given period, the less satisfaction (utility) generated by consuming each additional (marginal) unit of the same good.
18. THE BASIS OF CHOICE: UTILITY FIGURE 6.5 Graphs of Frank’s Total and Marginal Utility 12 12 1 10 22 2 34 34 32 28 TOTAL UTILITY 0 6 2 5 4 4 6 3 MARGINAL UTILITY TRIPS TO CLUB TABLE 6.2 Total Utility and Marginal Utility of Trips to the Club Per Week
19. THE BASIS OF CHOICE: UTILITY ALLOCATING INCOME TO MAXIMIZE UTILITY 0 6.00 0 51 6 .5 6.00 3 51 5 1.0 6.00 6 48 4 1.5 6.00 9 42 3 2.0 6.00 12 33 2 3.5 $6.00 21 21 1 (5) MARGINAL UTILITY PER DOLLAR ( MU/P ) (4) PRICE ( P ) (3) MARGINAL UTILITY ( MU ) (2) TOTAL UTILITY (1) BASKETBALL GAMES PER WEEK 0 3.00 0 34 6 0.7 3.00 2 34 5 32 28 22 12 (2) TOTAL UTILITY 1.3 3.00 4 4 2.0 3.00 6 3 3.3 3.00 10 2 4.0 (5) MARGINAL UTILITY PER DOLLAR ( MU/ P) $3.00 (4) PRICE ( P ) 12 1 (3) MARGINAL UTILITY ( MU ) (1) TRIPS TO CLUB PER WEEK TABLE 6.3 Allocation of Fixed Expenditure per Week Between Two Alternatives
20. THE BASIS OF CHOICE: UTILITY THE UTILITY-MAXIMIZING RULE In general, utility-maximizing consumers spread out their expenditures until the following condition holds:
21. THE BASIS OF CHOICE: UTILITY DIMINISHING MARGINAL UTILITY AND DOWNWARD-SLOPING DEMAND FIGURE 6.6 Diminishing Marginal Utility and Downward-Sloping Demand
22. INCOME AND SUBSTITUTION EFFECTS THE INCOME EFFECT When the price of something we buy falls, we are better off . When the price of something we buy rises, we are worse off .
23. INCOME AND SUBSTITUTION EFFECTS THE SUBSTITUTION EFFECT Both the income and the substitution effects imply a negative relationship between price and quantity demanded—in other words, downward-sloping demand. When the price of something falls, ceteris paribus, we are better off, and we are likely to buy more of that good and other goods (income effect). Because lower price also means “less expensive relative to substitutes,” we are likely to buy more of the good (substitution effect). When the price of something rises, we are worse off, and we will buy less of it (income effect). Higher price also means “more expensive relative to substitutes,” and we are likely to buy less of it and more of other goods (substitution effect).
24. INCOME AND SUBSTITUTION EFFECTS FIGURE 6.7 Income and Substitution Effects of a Price Change
25. CONSUMER SURPLUS consumer surplus The difference between the maximum amount a person is willing to pay for a good and its current market price. diamond/water paradox A paradox stating that (1) the things with the greatest value in use frequently have little or no value in exchange, and (2) the things with the greatest value in exchange frequently have little or no value in use.
26. CONSUMER SURPLUS cost-benefit analysis The formal technique by which the benefits of a public project are weighed against its costs. FIGURE 6.8 The Diamond/Water Paradox
27. HOUSEHOLD CHOICE IN INPUT MARKETS THE LABOR SUPPLY DECISION 1. Whether to work 2. How much to work 3. What kind of a job to work at As in output markets, households face constrained choices in input markets. They must decide 1. Availability of jobs 2. Market wage rates 3. Skills they possess In essence, household members must decide how much labor to supply. The choices they make are affected by
28. HOUSEHOLD CHOICE IN INPUT MARKETS The wage rate can be thought of as the price—or the opportunity cost—of the benefits of either unpaid work or leisure. FIGURE 6.9 The Trade-Off Facing Households
29. HOUSEHOLD CHOICE IN INPUT MARKETS THE PRICE OF LEISURE Trading off one good for another involves buying less of one and more of another, so households simply reallocate money from one good to the other. “Buying” more leisure, however, means reallocating time between work and nonwork activities. For each hour of leisure that I decide to consume, I give up one hour’s wages. Thus the wage rate is the price of leisure .
30. HOUSEHOLD CHOICE IN INPUT MARKETS INCOME AND SUBSTITUTION EFFECTS OF A WAGE CHANGE labor supply curve A diagram that shows the quantity of labor supplied at different wage rates. Its shape depends on how households react to changes in the wage rate.
31. HOUSEHOLD CHOICE IN INPUT MARKETS When leisure is added to the choice set, the line between input and output market decisions becomes blurred. In fact, households decide simultaneously how much of each good to consume and how much leisure to consume. FIGURE 6.10 Two Labor Supply Curves
32. HOUSEHOLD CHOICE IN INPUT MARKETS SAVING AND BORROWING: PRESENT VERSUS FUTURE CONSUMPTION Most empirical evidence indicates that saving tends to increase as the interest rate rises. In other words, the substitution effect is larger than the income effect. financial capital market The complex set of institutions in which suppliers of capital (households that save) and the demand for capital (business firms wanting to invest) interact.
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35. Appendix FIGURE 6A.1 An Indifference Curve DERIVING INDIFFERENCE CURVES An indifference curve is a set of points, each point representing a combination of goods X and Y , all of which yield the same total utility.
36. Appendix FIGURE 6A.2 A Preference Map: A Family of Indifference Curves The shapes of the indifference curves depend on the preferences of the consumer, and the whole set of indifference curves is called a preference map .
37. Appendix PROPERTIES OF INDIFFERENCE CURVES The slope of an indifference curve is the ratio of the marginal utility of X to the marginal utility of Y , and it is negative. If we divide both sides by MU Y and by X , we obtain
38. Appendix FIGURE 6A.3 Consumer Utility-Maximizing Equilibrium CONSUMER CHOICE As long as indifference curves are convex to the origin, utility maximization will take place at the point at which the indifference curve is just tangent to the budget constraint.
39. Appendix Where two curves are tangent, they have the same slope, which implies that the slope of the indifference curve is exactly equal to the slope of the budget constraint at the point of tangency: By multiplying both sides of this equation by MU Y and dividing both sides by P X , we can rewrite this utility-maximizing rule as slope of indifference curve = slope of budget constraint
40. Appendix FIGURE 6A.4 Deriving a Demand Curve from Indifference Curves and Budget Constraint DERIVING A DEMAND CURVE FROM INDIFFERENCE CURVES AND BUDGET CONSTRAINTS