《管理经济学与商业策略 Managerial Economics & Business Strategy》教学资源（PPT课件讲稿，英文版）Chapter 4 The Theory of Individual Behavior

Managerial Economics Business strategy Chapter 4 The Theory of Individual Behavior (((( Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Managerial Economics & Business Strategy Chapter 4 The Theory of Individual Behavior

Overview I Consumer behavior Indifference Curve Analysis Consumer Preference Ordering IL. Constraints The Budget Constraint Changes in Income Changes in Prices III Consumer Equilibrium IV Indifference Curve analysis Demand Curves Individual demand Market demand Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Overview I. Consumer Behavior  Indifference Curve Analysis  Consumer Preference Ordering II. Constraints  The Budget Constraint  Changes in Income  Changes in Prices III. Consumer Equilibrium IV. Indifference Curve Analysis & Demand Curves  Individual Demand  Market Demand

Consumer behavior Consumer Opportunities a The possible goods and services consumer can afford consume C onsumer preferences a The goods and services consumers actually consume Given the choice between 2 bundles of goods a consumer either Prefers bundle a to bundle b: a>B Prefers bundle b to bundle a:a<B a Is indifferent between the two: a-B Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Consumer Behavior • Consumer Opportunities  The possible goods and services consumer can afford to consume. • Consumer Preferences  The goods and services consumers actually consume. • Given the choice between 2 bundles of goods a consumer either  Prefers bundle A to bundle B: A  B  Prefers bundle B to bundle A: A  B  Is indifferent between the two: A  B

Indifference Curve analysis Indifference Curve GoodY A curve that defines the combinations of2 or more goods that give a consumer the same level of satisfaction Marginal rate of Substitution The rate at which a consumer is willing to substitute one good for another and stay at the same satisfaction leve GoodⅩ Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Indifference Curve Analysis Indifference Curve  A curve that defines the combinations of 2 or more goods that give a consumer the same level of satisfaction. Marginal Rate of Substitution  The rate at which a consumer is willing to substitute one good for another and stay at the same satisfaction level. I. II. III. Good Y Good X

Consumer Preference Ordering Completeness The consumer is capable of expressing a preference for all bundles of goods More is better Diminishing marginal Rate of Substitution Transitivity Given 3 bundles of goods: A. b& c Fasb andbsc then asc Ifab and b c then a c Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Consumer Preference Ordering • Completeness  The consumer is capable of expressing a preference for all bundles of goods. • More is Better • Diminishing Marginal Rate of Substitution • Transitivity  Given 3 bundles of goods: A, B & C.  If A  B and B  C, then A  C.  If A  B and B  C, then A  C

The budget constraint Opportunity set The Opportunity set The set of consumption bundles that are affordable .PX+PY<M Budget Line Budget Line The bundles of goods that exhaust a consumers income ·PX+PY=M. Market rate of substitution The slope of the budget line P、/P Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 The Budget Constraint • Opportunity Set  The set of consumption bundles that are affordable. • PxX + PyY  M. • Budget Line  The bundles of goods that exhaust a consumers income. • PxX + PyY = M. • Market Rate of Substitution  The slope of the budget line • -Px / Py Y X The Opportunity Set Px Py Budget Line

Consumer Equilibrium The equilibrium consumption bundle is Consumer the affordable bundle equilibrium that yields the highest level of satisfaction Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Consumer Equilibrium • The equilibrium consumption bundle is the affordable bundle that yields the highest level of satisfaction. I. II. III. X Y Consumer Equilibrium

Changes in the budget line Y Changes in Income Increases lead to a parallel outward shift in the budget line a Decreases lead to a parallel downward shift Changes in Price Y New Budget line for aa decreases in the price of a price decrease good X rotates the budget line counter-clockwise An increases rotates the budget line clockwise Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Changes in the Budget Line • Changes in Income  Increases lead to a parallel, outward shift in the budget line.  Decreases lead to a parallel, downward shift. • Changes in Price  A decreases in the price of good X rotates the budget line counter-clockwise.  An increases rotates the budget line clockwise. X Y X Y New Budget Line for a price decrease

Changes in Price Substitute goods An increase(decrease)in the price of good X leads to an increase ( decrease)in the consumption of good Y. Complementary goods An increase( decrease)in the price of good X leads to a decrease(increase)in the consumption of good Y Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Changes in Price • Substitute Goods  An increase (decrease) in the price of good X leads to an increase (decrease) in the consumption of good Y. • Complementary Goods  An increase (decrease) in the price of good X leads to a decrease (increase) in the consumption of good Y

Complementary goods Pretzels (Y) When the price of good X falls, the consumption of complementary good y rises B A Beer(X) Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Complementary Goods When the price of good X falls, the consumption of complementary good Y rises. Pretzels (Y) Beer (X) II I 0 Y2 Y1 X1 X2 A B