Temat- pierogi

Theory of consumer behavior pierogi

Theory of consumer behavior:

It explains how the consumer decides to spend limited resources at his disposal.

Consumer:

A separate unit, capable of undertaking economic activities consisting in the purchase of goods under given market conditions (specific prices, specific consumer income).

Utility:

Property of the object of the activity by which they promote the production of benefits or prevent damage to an interested party.

Marginal utility:

The increase in consumer utility caused by the consumption of an additional unit of a given good

Total utility curve and the law of diminishing marginal utility:

a) And Gossen’s law – the law of diminishing marginal utility
b) dependencies of the law of diminishing marginal utility:

– psychological features – kind of good – consumption time

Assumptions of the cardinal utility theory:

a) The consumer acts in accordance with the premises of rational operation.
b) Consumer preferences remain unchanged over the period under review.
c) The usefulness of every good can be measured (measured in money).
d) Additivity of the usefulness of goods and items included in the consumption basket.
e) The separability of the usefulness of goods included in the consumption basket.

Assumptions of the indifference curve theory:

a) The consumer acts in accordance with the premises of rational operation.
b) Consumer preferences are constant over the period under review.
c) The consumer does not attribute numerical values ​​to consumer alternatives, but only organizes them relative to each other.

Consumer balance:

A state of some stability in the consumer’s purchasing habits at which the individual maximizes its preferences.

Consumer balance conditions:

Budget restriction:

a) BL budget line:

A set of points denoting all possible combinations of considered goods (X and Y), obtainable at a given income and specified prices.

b) Budget line equation:

Hence:

c) Slope of the budget line:

PX / PY Market exchange rate of good Y for good X

d) Budget line transfers:

II Gossen law:

II Gossen’s law based on the principle of equimarginalism or equalization of marginal values.

Consumer preferences:

Determining the optimal consumption basket (combination of goods X and Y) requires the following simplifying assumptions about consumer preferences:

a) The consumer knows how to compare baskets of goods (completeness of preferences).

He can tell if combination A favors B or whether C is just as good for him as D. A> B or CD.

b) The consumer compares pairs of sets of goods in an internally consistent manner (transitivity of preferences)

If he chooses basket A able to get B, and among B and C he prefers B, then having A and C at his disposal he will choose A.

c) Each basket of goods is not worse than itself (maneuverability of preference relations)
d) If the consumer chooses from two baskets [X, Y] and [X ‘, Y], where X’> X, then the basket [X ‘, Y] or [X’, Y]> [X , Y] (the consumer prefers to have more goods than less)
e) Consumer preferences are still (continuity of preferences)

Graphic illustration of consumer preferences:

Indifference curve:

a) Graphic representation of consumer baskets equally preferred by the consumer.
b) The symbol of the indifference curve is I (indifference)
c) Indifference curves map – a set of indifference curves. The map of indifference curves is therefore a set of all potentially possible consumption alternatives ordered by the consumer.

Graphic illustration of the indifference curve for substitution goods:

Graphic illustration of the indifference curve for perfectly substitutable goods:

Graphic illustration of the indifference curve for complementary goods:

Basic information about the indifference curve:

a) All combinations on the same indifference curve are equally preferred by the consumer.
b) The further away from the origin of the coordinate system the indifference curve is, the more usefulness it represents.
c) Indifference curves cannot have common points.
d) Typical indifference curves (i.e. plotted for substitution goods) are convex relative to the origin of the coordinate system.
e) The slope coefficient of the indifference curve in economic interpretation is the marginal rate of substitution of good Y with good X (MRSYX).
f) As the indifference curve moves downwards, the marginal rate of substitution of good Y with good X decreases, which means that the consumer is less willing to replace good Y with good X as the share of Y decreases and the share of X in the consumption structure increases.

Consumer equilibrium in terms of the theory of indifference curves:

If: and TU with changes in the structure of consumption X and Y within the same indifference curve = 0, what we can write: then:

Consumer balance conditions:

Graphic illustration of the consumer equilibrium point for substitution goods:

Graphic illustration of the consumer balance point for goods perfectly su