6. Consumer Behavior
Lecture Notes
1. Individual demand curves can be constructed from observing consumer
purchasing behaviors as we change price.
a. This is called REVEALED PREFERENCE
b. Market demand curves are constructed by aggregating individual demand
curves for specific commodities.
2. Individual preferences can be modeled using a model called indifference curve -
budget constraint and from this model we can derive an individual demand curve.
a. The budget constraint shows the consumer's ability to purchase goods.
The consumer is assumed to spend their resources on only beer and pizza. If all
resources are spent on beer then the intercept on the beer axis is the amount of beer
the consumer can purchase; on the other hand, if all resources are spent on pizza then
the intercept on that axis is the amount of pizza that can be had.
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Lecture Notes
1. Individual demand curves can be constructed from observing consumer
purchasing behaviors as we change price.
a. This is called REVEALED PREFERENCE
b. Market demand curves are constructed by aggregating individual demand
curves for specific commodities.
2. Individual preferences can be modeled using a model called indifference curve -
budget constraint and from this model we can derive an individual demand curve.
a. The budget constraint shows the consumer's ability to purchase goods.
The consumer is assumed to spend their resources on only beer and pizza. If all
resources are spent on beer then the intercept on the beer axis is the amount of beer
the consumer can purchase; on the other hand, if all resources are spent on pizza then
the intercept on that axis is the amount of pizza that can be had.
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