AN INTRODUCTION TO MICROECONOMICS
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Transcript of AN INTRODUCTION TO MICROECONOMICS
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AN INTRODUCTION TOMICROECONOMICS
Dr. Mohammed Migdad
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Consumer BehaviorTheories
CHAPTER 4
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Chapter 4 content:Chapter fourTalks about consumer behavior theories which include:
Marginal utility theory, Marginal and total utility, Consumer equilibrium, The indifference curve theory, The indifference map, The budget line, And the equilibrium using IC theory.
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4.1 Introduction
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4.2 Marginal Utility Theory
In this section we will shed some light on:1) The difference between Marginal and Total
utility.2) The balance of consumers using marginal
utility theory.3) Deriving the consumer demand curve.4) Problem facing the marginal utility theory.
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4.2.1 The Difference between Marginal and Total Utility
• Total Utility (TU) is the aggregate level of satisfaction or fulfillment that a consumer receives through the consumptions of a specific good or service in a given period of time.
• Marginal Utility (MU), however, is the amount of change in TU which is affected by the increase in consumption of one additional unit.
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Marginal Utility =
Change in total utility of a product
Change in consumed quantity of the product
MU = TU
Q
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Cases
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4.3 Consumer Equilibrium
• First condition
marginal utility of good X
=
marginal utility of good Y
= Marginal utility for money
price of good X price of good Y
Marginal utility for money =MU Y
=MU X
P Y P X
Marginal utility for the dollar =Marginal utility for the productProduct price.
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4.3 Consumer Equilibrium
• Second conditionIncome = (Purchased quantity of product X * price of product X) + (quantity of product Y * price of product Y)
I = Qx * Px + Qy * Py
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Example
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4.4 Utility Theory and the Law of Demand
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4.5 Consumer Surplus
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Example
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4.6 The Indifference Curve Theory
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4.6.1 Definition of Indifference Curve
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4.6.2 The Indifference Map
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4.6.3 Indifference Curve Properties
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4.6.4 Multiple Indifference Curves
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4.6.5 Budget Line (BL)
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4.7 Consumer Equilibrium Using Indifference Curves
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4.8 Deriving the Demand Curve
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