How to analyze the demand consumer behavior 2

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How to analyze the demand consumer behavior? 2 1

…it is difficult to link the subjective preferences of consumers to changes in prices, income and other market variables that are objective… 2

The ordinal approach to the consumer balance 3

The combinations of goods should be arranged in the order of preference 4

assumption: consumers can define packages of goods and services in the order of preferences 5

Function of total utility The quantity of goods consumed in the accounting period 6

Function of total utility The quantity of goods (or packages of goods) consumed in the accounting period 7

This equation describes some surface in threedimensional space 8

Qu ant ity of Y, co e nit nsu me me df or som u ed ns efin ite per iod f yo o , c d me X tit n ua Q 9 fo o rs fi de ri pe od

Indifference curve is the sum of all combinations of goods X and Y, which provide the same level of total utility or satisfaction Indifference map is a chart that reflects indifference curves 10

Quantity of Y, consumed for some definite period Curves U 1, U 2, U 3 - three Measurement: absolute multitudes of the indifference inclination of many possible levels of utility from consumption of curve at the point of different combinations of X and Y for consumption the same period Marginal rate of substitution X by Y The rate at which the consumer is (MRSху) - the number of Y units willing to make such substitution is consumer decline to purchase one called the marginal rate of substitution additional unit of X under the condition of constant total utility Quantity of X, consumed for some definite period 11

Is there a correlation between the marginal utility and marginal rates of substitution? Internet Water 12

Quantity of Y, consumed for some definite period ] consumption of Y is reduced by ∆Y that leads to the loss of utility - ∆Y MUy units of utility Quantity of X, consumed for some definite period 13

Quantity of Y, consumed for some definite period But total utility remains unchanged, loss from -∆Y is offset by the increased consumption of X The inclination of the indifference curve Quantity of X, consumed for some definite period 14

Quantity of Y, consumed for some definite period Quantity of X, consumed for some definite period 15

Quantity of Y, consumed for some definite period The utility measurement: ∆Uу = - ∆У MUy = - 4, 2 MUy The lost utility is offset by two more units of X ∆Uх = ∆Х MUх = 2 MUх Quantity of X, consumed for some definite period 16

Quantity of Y, consumed for some definite period As total utility at B = total utility at A, than: 2 MUх = - 4, 2 MUy Quantity of X, consumed for some definite period 17

Quantity of Y, consumed for some definite period Switch from В to С: Quantity of X, consumed for some definite period 18

Quantity of Y, consumed for some definite period Switch from С to D: Quantity of X, consumed for some definite period 19

Quantity of Y, consumed for some definite period The more X is consumed, the less is its marginal utility in comparison with the Y marginal utility, i. e. MRSxy decreases with increasing consumption of X Quantity of X, consumed for some definite period 20

Constantly decreasing MRS is a logical result of the assumption that the marginal utility of the product decreases as we acquire more of it Ех: 21

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