- •Qualification requirements in the field of knowledge with discipline
- •1. Required training base before studying the course
- •2. As the result of the discipline the student should know:
- •3. As the result of the discipline the student should be able to:
- •Methodical recommendations for the self-work according to the topics of the course
- •Module 1. Theory of consumer behavior. Theory of enterprise
- •(5Hours)
- •Topic 2. Marginal utility theory and consumer behavior (5hours)
- •Topic 3. Theory of ordinalism of consumer behavior theory (5 hours)
- •Topic 4. Analysis of consumer behavior (5 hours)
- •Main Requirement to the Design of the Assignment
- •Initial Data
- •List of the Tasks:
- •Individual data
- •Topic 5. Demand, Supply and their interaction (6 hours)
- •Topic 6. Microeconomic model of enterprise (5 hours)
- •Topic 7. Variation of the factors of production and their optimum (6 hours)
- •Topic 8. Production costs (6 hours)
- •Topic 10. Monopoly market (5 hours)
- •Topic 11. Oligopoly and monopolistic competition (8 hours)
- •Topic 12. Market of the factors of production (6 hours)
- •Topic 13. General market equilibrium and welfare economics (5 hours)
Topic 2. Marginal utility theory and consumer behavior (5hours)
Key points:
Three parts and three assumptions of consumer behaviour theory
Consumer Choice and Utility
Total Utility (TU) and Marginal Utility (MU). The law of diminishing marginal utility
Give the definitions to the following terms:
Consumer
Utility
Ordinalism
Cardinalism
Total Utility
Marginal Utility
Answer the following questions:
What are the main assumptions of Consumer Behavior concept? Give the explanation of each of them.
What are the basic conditions for the consumer choice?
What is the difference between total and average utility?
Provide the explanation of the law of diminishing marginal utility. Can you remember any example when the law doesn’t act?
Why do you think it’s necessary to study the consumer behavior?
Define if the statement true or false:
If preferences are transitive, more is always preferred to less.
Preferences are not complete which means that consumer can’t compare and rank all market baskets, ignoring costs in this case).
According to the basic assumption of consumer behaviour theory all goods are desirable
The objective in microeconomics is to minimize the satisfaction of individuals given their preferences, incomes and the prices of goods they buy.
When AU is a maximum, MU = TU. When TU is a maximum, MU is a maximum too.
There is no relationship between total utility and marginal utility.
A cardinal concept believes that individual preferences can be easily quantified or measured in terms of basic unit with the help of “utils”.
Market basket is a collection of one or more commodities.
Budget constraint is not taken into account under considering consumer’s choice.
Diminishing marginal utility law doesn’t have any exception.
Solve the tasks:
Using the data in the table below calculate the values of total and marginal utilities:
Quantity of the goods |
А-good |
В-good |
С-good |
|||
TU |
MU |
TU |
MU |
TU |
MU |
|
1 |
|
20 |
19 |
|
22 |
|
2 |
|
15 |
30 |
|
|
10 |
3 |
|
12 |
38 |
|
39 |
|
4 |
|
8 |
43 |
|
44 |
|
5 |
|
6 |
45 |
|
|
3 |
Utility function of a consumer is U(x) = 12x – x2, when х is the quantity of the biscuit consumer eats. What quantity of biscuits brings maximum satisfaction to the consumer? Show the graphical explanation.
Which of the following ranks of total utility demonstrates the law of diminishing utility?
а) 20, 30, 40, 50; b) 20, 28, 34, 38; c) 20, 40, 80, 160; d) 20, 35, 55, 80.
Links and references:
http://www.saylor.org/site/wp-content/uploads/2012/07/ECON101-Reynolds-Consumer-Behavior.pdf