Bài giảng MicroEconomics - Chapter 6 Consumer Behavior

Consumer Behavior06McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.Law of Diminishing Marginal UtilityUtility is the satisfaction one gets from consuming a good or serviceNot the same as usefulnessSubjectiveDifficult to quantifyLO16-2Law of Diminishing Marginal UtilityUtil is one unit of satisfaction or pleasureTotal utility is the total amount of satisfactionMarginal utility is the extra satisfaction from an additional unit of the good MU = ΔTU/ΔQLO16-3Law of Diminishing Marginal UtilityAs consumption of a good or service increases, the marginal utility obtained from each additional unit of the good or service decreasesExplains downward sloping demandLO16-4Total Utility and Marginal UtilityLO101020301086420-212345671234567Total Utility (Utils)Marginal Utility (Utils)(2)TotalUtility,Utils(3)MarginalUtility,Utils012345670101824283030281086420-2Total UtilityTU(1)TacosConsumedPer MealMU]]]]]]]6-5Theory of Consumer BehaviorRational behaviorPreferencesBudget constraintPricesLO26-6Utility Maximizing RuleConsumer allocates his or her income so that the last dollar spent on each product yields the same amount of extra (marginal) utilityAlgebraically MU of product A MU of product B Price of A Price of BLO2=6-7Deriving the Demand CurveLO3Price of Orange 0$1$246Quantity Demanded of Oranges$2146QuantityDemandedPrice Per OrangeDO6-8Income and Substitution EffectsIncome effectThe impact that a price change has on a consumer’s real incomeSubstitution effectThe impact that a change in a product’s price has on its relative expensivenessLO46-9Prospect TheoryHow people actually deal with life’s ups and downsPeople judge things relative to the status quoPeople experience:Diminishing marginal utility for gainsDiminishing marginal disutility for lossesPeople are loss adverseLO56-10Losses and Shrinking PackagesConsumers see any price increase as a loss relative to the status quoProducers are reducing package size instead of raising pricesLO56-11Framing Effects and AdvertisingConsumers evaluate events in a particular mental frameNew information alters the frame in which the consumer defines whether situations are gains or lossesLO56-12The Endowment EffectMarket transactions may be affected by the endowment effect because:The seller has a tendency to demand a higher priceThe buyer has a tendency to offer a lower priceLO56-13