Economic Issues
----
Further story: The Theory of Consumer Choice
By Xi Chen
The theory of consumer choice have the following topics:
The customer’s budget constraint line
Indifferent curve
Income and price effect
The Budget constraint: What the consumer can afford
The
budget constraint (
预算约束
)
describes the limit on the consumption “bundles” (
组合
)that a consumer can afford.
People consume less than they desire because their spending is constrained, or limited, by their income.
The Budget constraint: What the consumer can afford
The Budget constraint: What the consumer can afford
The Budget constraint: What the consumer can afford
The Budget constraint: What the consumer can afford
6
B
6
C
A
3
3
The Budget constraint: What the consumer can afford
The Budget constraint: What the consumer can afford
6
B
6
C
A
3
3
消费者面临披萨与可乐时，支付的起的消费组合。
预算约束线的斜率是两种物品的相对价格，本例一瓶可乐价格等于一个披萨，因此斜率为一。
The budget constraint shows the various combinations of goods the consumer can afford given his or her income and the prices of the
two goods
.
The
slope
of the budget constraint line equals the relative price of the two goods, that is,
the price of one good compared to the price of the other
.
It measures the rate at which the consumer can trade one good for the other.
The Budget constraint: What the consumer can afford
An
indifference
curve(
无差异曲线
)
is a curve that shows consumption bundles that give the consumer the same level of satisfaction.
Preference: What the consumer wants ?
Figure 2 The Consumer’s Preferences
0
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Preference: indifference curve
Marginal rate of substitute
边际替代率
Quantity
of Pepsi
Quantity
of Pizza
Figure 4 Bowed Indifference Curves
Quantity
of Pizza
Quantity
of Pepsi
0
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A
C
Preference: indifference curve
Higher indifference curves are preferred to lower
ones(
更高的无差异曲线代表更高的消费者效益
).
Indifference curves are downward sloping.
Indifference curves do not cross.
Indifference curves are bowed inward.
Property of indifference curve
Figure 5 Perfect Substitutes and Perfect Complements
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Preference: indifference curve
Figure 5 Perfect Substitutes and Perfect Complements
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Optimization: What the customer’s choice
Consumers want to get the combination of goods on the highest possible indifference curve
.(
效益最大化
)
However, the consumer must also end up on or below his budget
constraint. (
在购买能力之内
)
Figure 6
The
Quantity
of Pizza
Quantity
of Pepsi
0
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The consumer’s optimum
最优
(
消费
)
选择
/
组合
Consumer optimum occurs at the point where the
highest
indifference curve and the budget constraint are
tangent
（切线）
.
Figure 7 An Increase in Income
Quantity
of Pizza
Quantity
of Pepsi
0
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An increase in income affects consumer’s optimum
If a consumer buys more of a good when his or her income rises, the good is called a
normal
good(
正常物品
)
.
If a consumer buys less of a good when his or her income rises, the good is called an
inferior
good(
低档物品
).
A fall in the price of any good rotates the budget constraint outward and changes the slope of the budget constraint.
An fall in price affects consumer’s optimum
Quantity
of Pizza
Quantity
of Pepsi
0
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The Income
Effect (
收入效应
)
The
income effect
is the change in
consumption(
消费组合
)
that results when a price change moves the consumer to a higher or lower indifference curve.
The Substitution
Effect(
替代效应
)
The
substitution effect
is the change in
consumption
that
results when a price change moves the consumer along an indifference curve to a point with a different marginal rate of substitution.
Figure 10 Income and Substitution Effects
Quantity
of Pizza
Quantity
of Pepsi
0
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Table 1 Income and Substitution Effects When the Price of Pepsi Falls
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Figure 10 Income and Substitution Effects
Quantity
of Pizza
Quantity
of Pepsi
0
Copyright©2004 South-Western
从
A
点变到
B
点是边际替代率发生变化，消费者总福利没有变化，
B
变
到
C
点是消费者总福利增加，边际替代率不变。
Do all demand curves slope downward?
Demand curves can sometimes slope upward.
This happens when a consumer buys more of a good when its price rises.
Giffen
goods
Economists use the term
Giffen
good to describe a good that violates the law of demand.
Giffen
goods are goods for which an increase in the price raises the quantity demanded.
They have demand curves that slope upwards.
Figure 12 A
Giffen
Good
Quantity
of Meat
Quantity of
rice
0
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Figure 12 A
Giffen
Good
Quantity
of Meat
Quantity of
rice
0
I
1
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