Ok. Let's start!
First, we will introduce the Microeconomics. Overview of the course will including:
1, Consumer theory:
-how consumers decide what and how much to buy.
2, Labour supply
-how consumers earn their income. How much to work.
3, Theory of the firm:
-how firms decide how much to produce and what price to charge
4, Market structure
-competition, monopoly
5, Applied lectures and Mathematics of microeconomics.
Today the Lecture 1 will be the preferences and utility.
Like the firms maximise their profits the consumers also will maximise the utility they get from consuming goods and services.
The consumers can rank goods and services and choose what they consider as best.
Such rank we called consumer's preferences.
The preferences will be illustrated with indifference curves, which is a graphical representation of the consumer utility function.
5, Consumer will then maximise utility but like the firm need to consider the cost, the consumer also need to consider the budget constraint when maximising their utility.
6,all these concepts will help us understanding consumer's behaviou and their optimal choice. they will allow us to derive a Demand Function(important).
Consumer Preferences.
Consumer choose to consumer different combination of good &services, which we call consumption Bundles.
This Consumption Bundles will have those characteristic.
1, Completeness
2, Transitivity( examply, if point A > B, B>C, that mean the A must > C)
3, Non-satiation.(More is alwaus preferred to less)
Indifference curves
Indifference curve is the loci of bundles among which the consumer is indifferent.
2, all points on the indifference curve would provide the samee level of utility to the consumer.
Nots: each consumer has different preferences and indifference curves.
The more assumption about preferences
1, Continuty, indifference curves are continuous, mean it's forever divisible, draw smooth lines, no sudden reversal of preferences.
2, Convexity, Indifference curves are convex to the origin.( important, it's convex to orgin curve)
Impossible situation for indifference curve.
A, Crossing, the indifference curve will not able to crossing ever
B, Upward sloping ( it should be downward sloping)
C, Thick. (that mean no point will be the same position and same curve)
The slope of indifference curve we called Marginal rate of substitution
Definition: The maximum amount of a good that a consumer is willing to sacrifice to obtain one more unit of other goods.
Formula:
MRS=∆X2/∆X1 (triangle mean changing)
X1 on the horizontal axis and X2 at the vertical axis.
Note, MRS is the slope of the IC and has a different value at every point along the curve.
MRS( marginal rate of substitution) is diminishing marginal rate of substitution.
e.g. when you have more at good B you will given up less good A to exchange extra unit good B.
utility Function
Definition: It's a function that assigns a utility level to different consumption bundles ensuring that preferred bundles get assigned higher utility levels.
Formula: U=u(x1,x2)
Then we change the MRS formula described in terms of the utility function:
MRS=△X2/△X1= -MU1/ MU2 (marginal utility, we will talk it later)
发表于 2012-3-11 04:38:00
楼主