INTRODUCTION TO ECONOMICS I - Unit 3 Chapter Summary
Deal with questions such as “How does a consumer decide what to buy?” “What are the trade-offs faced by him while making such decisions?” “How do the decisions change with changes in factors such as price, incomes, interest rates, etc.?” Understand the concepts of affordability and budget constraint Derive indifference curves and explain how 3 they depict consumer preferences Understand and interpret the impact of the changes in income and price on the consumer’s choice Identify the income and substitution effects Derive demand curves, and apply the theory of consumer choice to a few implications about household behavior