Consumer Theory and X1

中级微观经济学

参考书： Hal R. Varian. Intermediate Microeconomics, A Modern Approach. W. W. Norton & Company, Inc.

1 BUDGET CONSTRAINT

Consumer theory ---- how consumers buy their goods? Economists assume: consumers choose the best bundle of goods they can afford. Two aspects: ----Consumers choose the most preferred goods. ----They are limited by economic condition.

The Budget Constraint Consumption bundles: （消费束，商品组合）: a list of numbers of goods and services. X = (x1, x2, …, xn,) In the case of two goods: good 1 and good 2. Bundle of goods: X = (x1, x2) Prices of goods: (p1, p2), The amount of money the consumer has to spend: m. The consumer’s affordable consumption bundles, (x1, x2) satisfy p1x1 + p2x2 ≤ m. ----The budget set of the consumer (预算集) .

good 2

m/p2

O m/p1 good 1

Two Goods Are Often Enough Composite good ----take x2 as everything else, the dollars spent on other goods. For example, x1: consumption of milk in quarts per month. The budget constraint will take the form p1x1 + x2 ≤ m.

The case of n goods Budget constraint: p1x1 + p2x2+…+ pnxn ≤ m.

Properties of the Budget Set Budget line（预算线）: p1x1 + p2x2 = m. Vertical intercept: m/p2 Horizontal intercept: m/p1. Slope: – p1/p2 Economic interpretation of slope: For the bundle (x1, x2): p1x1 + p2x2 = m. After a change in bundle (△x1, △x2): p1(x1+△x1) + p2(x2+△x2) = m.

good 2

x2 △x2 △x1

O x1 good 1

Subtracting the first equation from the second gives p1△x1