AN INTRODUCTION TO MICROECONOMICS

1. AN INTRODUCTION TOMICROECONOMICS Dr. Mohammed Migdad

2. Consumer BehaviorTheories CHAPTER 4

3. Chapter 4 content: Chapter four Talks about consumer behavior theories which include: • Marginal utility theory, • Marginal and total utility, • Consumer equilibrium, • The indifference curve theory, • The indifference map, • The budget line, • And the equilibrium using IC theory.

4. 4.1 Introduction

5. 4.2 Marginal Utility Theory In this section we will shed some light on: • The difference between Marginal and Total utility. • The balance of consumers using marginal utility theory. • Deriving the consumer demand curve. • Problem facing the marginal utility theory.

6. 4.2.1 The Difference between Marginal and Total Utility • Total Utility (TU) is the aggregate level of satisfaction or fulfillment that a consumer receives through the consumptions of a specific good or service in a given period of time. • Marginal Utility (MU), however, is the amount of change in TU which is affected by the increase in consumption of one additional unit.

8. Cases

9. 4.3 Consumer Equilibrium • First condition

10. 4.3 Consumer Equilibrium • Second condition Income = (Purchased quantity of product X * price of product X) + (quantity of product Y * price of product Y) I = Qx * Px + Qy * Py

11. Example

12. 4.4 Utility Theory and the Law of Demand

13. 4.5Consumer Surplus

14. Example

15. 4.6 The Indifference Curve Theory

16. 4.6.1 Definition of Indifference Curve

17. 4.6.2 The Indifference Map

18. 4.6.3 Indifference Curve Properties

19. 4.6.4 Multiple Indifference Curves

20. 4.6.5 Budget Line (BL)

21. 4.7 Consumer Equilibrium Using Indifference Curves

22. 4.8 Deriving the Demand Curve