1 chapter 5 consumer choice e conomics u pdated s econd e dition r obert e. h all s tanford u...
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ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 5 / CONSUMER CHOICE © 2003 South-Western 3 Figure 2Changes in the Budget Line Number of Concerts per Month Number of Concerts per Month Number of Concerts per Month Number of Movies per Month 5 Number of Movies per Month Number of Movies per Month 15 5 (a)(b)(c)TRANSCRIPT
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CHAPTER 5 CONSUMER CHOICE
ECONOMICSUPDATED SECOND EDITION
ROBERT E. HALLSTANFORD UNIVERSITY
MARC LIEBERMANNEW YORK UNIVERSITY
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure 1 The Budget Constraint
Number of Concerts
per Month
Number of Movies
per Month
A 15
12
9
6
3
1 2 3 4 5
B
C
D
E
G
H
F
Max’s Consumption Possibilities with Income of $150
Concerts at $30 each Movies at $10 each
Total Expenditureon Concerts
Total Expenditureon Movies Quantity Quantity
A 0 $ 0 1 5 $1 5 0 B 1 $ 3 0 1 2 $1 2 0 C 2 $ 60 9 $ 90 D 3 $ 90 6 $ 60 E 4 $1 2 0 3 $ 3 0 F 5 $1 5 0 0 $ 0
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure 2 Changes in the Budget Line
Number of Concerts
per Month
Number of Concerts
per Month
Number of Concerts
per Month
Number of Movies per Month
5
Number of Movies per Month
Number of Movies per Month
15
5
15
15
(a) (b) (c)
10
30
5
15
30
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure 3 Total and Marginal Utility
Ice Cream Cones per Week
Utils
1
60
50
40
70
30
20
10
2 3 4 5 6
Ice Cream Cones per Week
Utils
Total Utility
Marginal Utility
30
20
10
1 2 3 4 5 6
(a)
(b)
Lisa’s Total and Marginal Utility from Consuming Ice Cream Cones
Number of Cones
Total Utility
MarginalUtility
0 0 utils 3 0 utils
1 3 0 utils 2 0 utils
2 5 0 utils 1 0 utils
3 60 utils 5 utils
4 65 utils 3 utils
5 68 utils 0 utils
6 68 utils
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure 4 Consumer Decision Making
Numberof Concerts per Month
Number
of Movies per Month
A 15
12
9
6
3
1 2 3 4 5
B
C
D
E G
F
CONCERTS at $30 each MOVIES at $10 each
(4) (7) Marginal Marginal
Utility Utility per Dollar per Dollar
(1) (2) (3) Spent on (5) (6) Spent on Point on Number of Marginal Last Concert Number Marginal Last Movie Budget Concer ts per Utility from ( M U concerts / of Movies Utility from ( M U movies /
Line Month Last Concert P concerts ) per Month Last Movie P movies )
A 0 — — 1 5 5 0 5 B 1 1,5 00 5 0 1 2 1 00 1 0 C 2 1,2 00 40 9 1 5 0 1 5 D 3 600 2 0 6 2 00 2 0 E 4 3 90 1 3 3 3 5 0 3 5 F 5 3 00 1 0 0 —
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure 5 Effects of an Increase in Income
Number of Concerts per Month
Number of Movies per Month
A
30
1 2 3 4 5
B
C
D
E
F
6 7 8 9 10
15
12
9
6
3 H´
H
H´´27
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure 6 Deriving the Demand Curve
Number of Concerts per Month
Number of Movies per Month
15
9
6
3
1 2 3 4 5
D
6
(a)
K
0
Number of Concerts per Month
Priceper
Concert
(b)
D
Max's Demand Curve for Concerts
$30
1 2 3 4 5
J10
15
J 11 J
6
30
K12
K5
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure 7 Income and Substitution Effects
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure 8 From Individual to Market Demand
Number of Bottles per Week
Price
$4
0 4
C C C ´´
A
Price Price
Number Number
Market Demand
Curve
Price
C
B
D
E
Jerry George(a)
(b)
Elaine
3
2
1
$4
3
2
1
3 10 27 44
12 0 6 12 0 10 20
$4
3
2
1
$4
3
2
1
of Bottles per Week
of Bottles per Week
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure 9 Time Allocation
Economics Score
C
90French Score
90
70
80
75 80
FE
D
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure A.1 An Indifference Curve
Minutes of Phone
Time
Un
its
of A
ll O
ther
Goo
ds
M
J
H
G
+1
–20
+1
–15
50
30
15
10 1211
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure A.2 An Indifference Map
Minutes of Phone
Time
Un
its
of A
ll O
ther
Goo
ds
50
30
15
10 1211
LJ
H
G
K
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure A.3 Consumer Decision Making
Minutes of Phone
Time
Units
of A
ll O
the r
Goo
ds
20
E
S
200R
160
100
ECONOMICS UPDATED 2e / HALL & LIEBERMANCHAPTER 5 / CONSUMER CHOICE© 2003 South-Western
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Figure A.4Deriving the Demand Curve
Pric
e pe
r Min
ute
of P
hone
Tim
e
Minutes of Phone
Time
Minutes of Phone
Time
E
FKate’s Demand for Phone Time
$2
1
20 30
(b)
20 30 100 200U
nits
of A
ll O
ther
Goo
ds
E
200F170
160
(a)