Introduction:
- Why do we have axioms?
- State 5 Axioms
- Define Utility; say it is an ordinal concept
- Define Constrained Optimisation
- Define Budget Constraint
- Define Indifference Curve
- Define Feasible Set
- Using utility analysis is important in giving insights into how consumers allocate their
spending and the impact of income and substitution effects as a result of price and income
changes; these can all be very useful for businesses in deciding on pricing strategies for their
products (Lipsey and Chrystal, 2015)
Main Body
- Analyse the Axioms of Consumer Theory: What do these mean for the shape of the
indifference curve?
- Special cases of indifference curves; why are they this given shape
- Analyse any other assumptions; Consumer is a price taker
- Analyse any shifts in budget constraint or indifference curve; what factors can shift each?
- Is Budget constraint non-linear? If so why?
- Where is the optimal choice for consumers and why is this the optimal choice?
- Corner solution?
- Diagram; shifts in indifference curve and or budget constraint and changes in consumption
as a result
- Maybe talk about happiness research? page 90 (Lipsey and Chrystal, 2015); increased utility
doesn’t equal increased satisfaction/happiness
Conclusion:
- Summarise the overall effect of changes in consumption/shift in budget
constraint/indifference curve
- Why do we have axioms?
- State 5 Axioms
- Define Utility; say it is an ordinal concept
- Define Constrained Optimisation
- Define Budget Constraint
- Define Indifference Curve
- Define Feasible Set
- Using utility analysis is important in giving insights into how consumers allocate their
spending and the impact of income and substitution effects as a result of price and income
changes; these can all be very useful for businesses in deciding on pricing strategies for their
products (Lipsey and Chrystal, 2015)
Main Body
- Analyse the Axioms of Consumer Theory: What do these mean for the shape of the
indifference curve?
- Special cases of indifference curves; why are they this given shape
- Analyse any other assumptions; Consumer is a price taker
- Analyse any shifts in budget constraint or indifference curve; what factors can shift each?
- Is Budget constraint non-linear? If so why?
- Where is the optimal choice for consumers and why is this the optimal choice?
- Corner solution?
- Diagram; shifts in indifference curve and or budget constraint and changes in consumption
as a result
- Maybe talk about happiness research? page 90 (Lipsey and Chrystal, 2015); increased utility
doesn’t equal increased satisfaction/happiness
Conclusion:
- Summarise the overall effect of changes in consumption/shift in budget
constraint/indifference curve
