unit i:theory of the consumer
DESCRIPTION
UNIT I:Theory of the Consumer. Introduction: What is Microeconomics? Theory of the Consumer Individual & Market Demand. 6/24. Theory of the Consumer. Indifference Curves Utility Functions Optimization under Constraint Income & Substitution Effects. How do consumers make optimal choices?. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/1.jpg)
UNIT I:Theory of the Consumer
• Introduction: What is Microeconomics?• Theory of the Consumer• Individual & Market Demand
6/24
![Page 2: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/2.jpg)
Theory of the Consumer
• Indifference Curves• Utility Functions• Optimization under Constraint• Income & Substitution Effects
How do consumers make optimal choices?
How do they respond to changes in prices and income?
![Page 3: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/3.jpg)
Utility Functions
X
U
Assume 1 Good:
U = 2X
Utility: The total amount of satisfaction one enjoys from a given level of consumption (X,Y)
![Page 4: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/4.jpg)
Utility Functions
X
U
Assume 1 Good:
X
U
U = 2X
MUx = U/X
= 2
Marginal Utility: The amount by which utility increases when consumption (of good X) increases by one unit
MUx = U/X
MUx
![Page 5: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/5.jpg)
Utility Functions
XX
U U
Assume 1 Good:
X
U
U
X
U = 2X
MUx = U/X
= 2
U (X)
We generally assume diminishing marginal utility
![Page 6: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/6.jpg)
Utility Functions
Y
X
U
Now Assume 2 Goods:
U (X)U (Y)
U = f(X,Y)
![Page 7: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/7.jpg)
Utility Functions
Y
X
U
U0 U1 U2 U3
U1
U2
U3
U0
U = f(X,Y)
Indifference curves
![Page 8: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/8.jpg)
Utility Functions
Y
X
U
U0 U1 U2 U3
U1
U2
U3
U0
U = f(X,Y)
XY
![Page 9: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/9.jpg)
Utility FunctionsMarginal Rate of Substitution (MRS): The rate at which a consumer is willing to trade between 2 goods. The amount of Y he is willing to give up for 1 unit of X.
Y Utility = No. of Apples + 2(No. of Oranges) U Along an indifference curve, U = 0
Therefore, MUxX + MUyY = 0- MUxX = MUyY
- (MUx/MUy)X = YY/X = - MUx/MUy
= MRS= slope
X
Generally, this rate will not be constant; it will depend upon the consumer’s endowment.
XY
![Page 10: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/10.jpg)
OptimizationWe assume that a rational consumer will attempt to maximize her utility. But utility increases with consumption of all goods, so utility functions have no maximum -- more is always better!
Y Utility = No. of Apples + 2(No. of Oranges)
U
X
Increasing utility
![Page 11: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/11.jpg)
OptimizationThe optimal consumption bundle places the consumer on the highest feasible indifference curve, given her preferences and the opportunities to trade (her income & the prices she faces).
Y Utility = No. of Apples + 2(No. of Oranges)
U
Y*
X* X
Indifference Curves depict consumer’s “willingness to trade”
Slope = - MRSBudget Constraint depicts “opportunities to trade”
Slope = - Px/Py
At point C, MRS = Px/Py, so consumer can’t improve thru trade.
C
![Page 12: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/12.jpg)
Two Conditions for Optimization under Constraint:
1. PxX + PyY = I Spend entire budget
2. MRSyx = Px/Py Tangency
Optimization
MRSyx = MUx/MUy = Px/Py
=> MUx/Px = MUy/Py
The marginal utility of the last dollar spent on each good should be the same.
![Page 13: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/13.jpg)
Optimization: An ExamplePat divides a monthly income of $1800 between consumption of food (X) and consumption of all other goods (Y). Pat’s preferences can be described by the following utility function:
U = X2Y
If the price of food is $1 and the price of all other goods is $2, find Pat’s optimal consumption bundle.
Pat should choose the combination of food and all other goods that places her on the highest feasible indifference curve, given her income and the prices she faces. This is the point where an indifference curve is tangent to the budget constraint (unless there is a comer solution).
![Page 14: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/14.jpg)
Optimization: An ExamplePat divides a monthly income of $1800 between consumption of food (X) and consumption of all other goods (Y). Pat’s preferences can be described by the following utility function:
U = X2Y
If the price of food is $1 and the price of all other goods is $2, find Pat’s optimal consumption bundle.
Since Pat’s utility function is U = X2Y, MUx = 2XY and MUy = X2. MRS = (-)MUx/MUy = (-)2XY/X2 = (-)2Y/X. Setting this equal to the (-)price ratio (Px/Py), we find ½ = 2Y/X, X = 4Y. This is Pat’s optimal ratio of the goods, given prices.
![Page 15: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/15.jpg)
Optimization: An ExamplePat divides a monthly income of $1800 between consumption of food (X) and consumption of all other goods (Y). Pat’s preferences can be described by the following utility function:
U = X2Y
If the price of food is $1 and the price of all other goods is $2, find Pat’s optimal consumption bundle.
To find Pat’s optimal bundle, we substitute the optimal ratio into the budget constraint: I = PxX + PyY, 1800 = (1)X + (2)Y,
1800 = (1)4Y + (2)Y = 6Y, so
Y* = 300, X* = 1200.
![Page 16: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/16.jpg)
Y
X
900
Y*=300
600 X*=1200
U = XY
Optimization: An ExampleGraphically:
Maximize: U = X2Y
Subject to: I = PxX + PyY
I = 1800; Px = $1; Py = $2
Y* = 300, X* = 1200.
![Page 17: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/17.jpg)
Optimization: An ExamplePat divides a monthly income of $1800 between consumption of food (X) and consumption of all other goods (Y). Pat’s preferences can be described by the following utility function:
U = X2Y
Now suppose the price of food rises to $2.
MRS = (-)2Y/X. Setting this equal to the new (-)price ratio (Px/Py), we find 1 = 2Y/X, X = 2Y. Substituting in Pat’s new budget constraint: I = PxX + PyY, 1800 = (2)X + (2)Y,
1800 = (2)2Y + (2)Y = 6Y, so
Y** = 300, X** = 600.
![Page 18: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/18.jpg)
Y
X
900
Y**=300
X**= 600 12001200
U = XY
Optimization: An ExampleGraphically:
Now: U = X2Y
I = 1800; Px’ = $2; Py = $2
Y* = 300, X* = 600.
![Page 19: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/19.jpg)
Y
X
900
Y**=300
X**= 600 1200 1200
U = XY
Graphically:Because the relative price of food has increased, Pat will consume less food (and more of all other goods). This the substitution effect. But because Pat is now relatively poorer (her purchasing power has decreased), she will consume less of both goods. This is the income effect.
Income & Substitution Effects
S
S
![Page 20: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/20.jpg)
Y
X
900
Y**=300
X**= 600 1200 1200
U = XY
Graphically:But because Pat is now relatively poorer (her purchasing power has decreased), she will consume less of both goods. This is the income effect.
In this case, the 2 effects are equal and opposite for Y, additive for X.
Income & Substitution Effects
![Page 21: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/21.jpg)
Individual & Market Demand
• Income & Substitution Effects (from last time)• Normal, Inferior, and Giffen Goods• Consumer Demand• Price Elasticity of Demand• Next Time: The Theory of the Firm
![Page 22: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/22.jpg)
Individual & Market Demand
We have seen how consumers make optimal choices. A rational consumer will attempt to maximize utility subject to market conditions (relative prices) and income. That is, given I, Px, Py, she chooses X and Y to maximize U.
Now, we want to ask, how do changes in prices effect these consumption decisions? X = f(Px).
We will see that changes in prices affect quantities through two causal channels: Income and substitution effects.
![Page 23: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/23.jpg)
Y
XNow his wage rises to$12/hr for the first 40 hrs/wk; it remains $8/hr above 40
hrs/wk.
1200
960
800
50 60 100 1200
Bullwinkle Moose faces a choice between leisure (X) and income (Y). He can work up to 100 hours a week at a wage of $8/hr. Initially, he chooses to work 50 hrs/wk.
Income & Substitution Effects
Draw his new budget constraint.
![Page 24: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/24.jpg)
Y
XNow his wage rises to$12/hr for the first 40 hrs/wk; it remains $8/hr above 40
hrs/wk.
1200
960
800
50 60 100 1200
Bullwinkle Moose faces a choice between leisure (X) and income (Y). He can work up to 100 hours a week at a wage of $8/hr. Initially, he chooses to work 50 hrs/wk.
Income & Substitution Effects
Will he work more than, less than, or equal to 50 hrs/wk?
What is the income effect?
His purchasing power is greater, so he will consume
more leisure, work less.
![Page 25: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/25.jpg)
Y
XNow his wage rises to$12/hr for the first 40 hrs/wk; it remains $8/hr above 40
hrs/wk.
1200
960
800
50 60 100 1200
Bullwinkle Moose faces a choice between leisure (X) and income (Y). He can work up to 100 hours a week at a wage of $8/hr. Initially, he chooses to work 50 hrs/wk.
Income & Substitution Effects
Will he work more than, less than, or equal to 50 hrs/wk?
What is the substitution effect?
At 50 hrs/wk., the new wage rate is the same as the old ($8/hr).
=> no substitution effect!
Px/Py = 8
![Page 26: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/26.jpg)
Pat divides a monthly income of $1800 between consumption of food (X) and consumption of all other goods (Y). Pat’s preferences can be described by the following utility function:
U = X2Y
Originally, the price of food is $1 and the price of all other goods is $2. Then the price of food rises to $2.
Because the relative price of food has increased, Pat will consume less food (and more of all other goods). This the substitution effect. But because Pat is now relatively poorer (her purchasing power has decreased), she will consume less of both goods. This is the income effect..
Income & Substitution Effects
![Page 27: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/27.jpg)
Y
X
900
Y**=300
X**= 600 1200 1200
Because the relative price of food has increased, Pat will consume less food (and more of all other goods). This the substitution effect.
Income & Substitution Effects
S
S
![Page 28: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/28.jpg)
Y
X
900
Y**=300
X**= 600 1200 1200
U = XYBut because Pat is now relatively poorer (her purchasing power has decreased), she will consume less of both goods. This is the income effect.
In this case, the 2 effects are equal and opposite for Y, additive for X.
Income & Substitution Effects
![Page 29: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/29.jpg)
Y
X
900
Y**=300
X**= 600 1200 1200
The move from A to B is the substitution effect;B to C is the income effect.
B is a point on the original indifference curve, tangent to
the new budget constraint, indicating the bundle the
consumer would choose at the new prices.
Income & Substitution Effects
AB
C
S
I
I
S
![Page 30: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/30.jpg)
Y
X
900
Y**=300
X**= 600 1200 1200
U = X2Y
We are looking for a point on the indifference curve that includes
Y = 300, X = 1200, for which MRS = 1 (the new price ratio):
At point B, MRS = 2Y/X = 1=> X = 2Y.
Also, Ua = Ub = 432,000,000
U = X2Y4Y3 = 432,000,000
Y3 = 108,000,000Yb = 476; Xb = 952
Income & Substitution Effects
AB
C
S
I
I
S
![Page 31: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/31.jpg)
Y
X
900
Y**=300
X**= 600 1200 1200
U = X2Y4Y3 = 432,000,000
Y3 = 108,000,000Yb = 476; Xb = 952
So the substitution effect is a decrease in X of 248 and an
increase in Y of 176.
The income effect is a decrease in X of 352
and a decrease in Yof 176.
Income & Substitution Effects
AB
C
S
I
I
S
![Page 32: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/32.jpg)
Y
X
900
Y**=300
X**= 600 1200 1200
How much would Pat be willing to pay to avoid this price increase?
Income & Substitution Effects
![Page 33: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/33.jpg)
Y
X
900
Y**=300
X**= 600 1200 1200
To calculate this amount, start by finding the minimum
income Pat needs to purchase a bundle on the new indifference curve.
Income & Substitution Effects
![Page 34: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/34.jpg)
Y
X
900
Y**=300
X**= 600 1200 1200
The difference between the market price of this bundle
and her income ( = 1800) is the amount she’d be willing
to pay to avoid the price increase. We call this the
equivalent variation measure of utility loss.
Income & Substitution Effects
![Page 35: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/35.jpg)
Normal & Inferior Goods
X
Y
Income-Expansion Path
Normal Good
For most goods, the quantity consumed will increase as income increases.
We call these normal goods. Y = f(X)
optimal ratio
![Page 36: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/36.jpg)
Normal & Inferior Goods
XX
Y Income
Engels Curve
Normal Good
Income-Expansion Path
X = f(I)
![Page 37: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/37.jpg)
Normal & Inferior Goods
X
Y
Inferior Good
For some goods, consumption will decrease at higher levels of income (e.g., hamburger).
We call these inferior goods.
Income-Expansion Path
![Page 38: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/38.jpg)
Normal & Inferior Goods
XX
Y Income
Engels Curve
Inferior Good
Income-Expansion Path
![Page 39: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/39.jpg)
Normal & Inferior Goods
X
Y
Normal Good
BA
B
A
X
Y
SS
Px = 1Px = 2
Px increases from $1 to $2.
The movement from A to B is the
substitution effect.
![Page 40: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/40.jpg)
Normal & Inferior Goods
X
Y
Normal Good
BA
Inferior Good
B
A
For both normal and inferior goods, the substitution effect is negative: consumption will increase as price decreases.
X
Y
SS
Px = 1Px = 2
Px increases from $1 to $2.
![Page 41: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/41.jpg)
Normal & Inferior Goods
X
Y
Normal Good
BA
C
Inferior Good
B
A
C
For normal goods the income effect is positive, and for inferior goods it is negative.
II
Y
X
![Page 42: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/42.jpg)
Normal & Inferior Goods
X
Y
Giffen Good
BA
C
C
A
For some inferior goods, the income effect is so large it outweighs the substitution effect (eg., ?).
S
I
Px
2
1
X
Px = 1
Px = 2
… giving rise to a upward sloping
demand curve.
![Page 43: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/43.jpg)
Do any of these cases violate the assumptions of well-behaved preferences that we look at last time?
No. Well-behaved preferences can give rise to all sorts of demand curves (depending on income and prices).
Normal & Inferior Goods
![Page 44: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/44.jpg)
Y
X
900
Y**=300
400 1200
Consumer DemandU = X2YI = 1800; Py = 2
Px*** = $3 Y*** = 300, X*** = 400.
![Page 45: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/45.jpg)
Consumer Demand
XX
Y
:
Px
Px = 3 2 1 400 600 1200
Demand Curve
3
2
1
X = f(Px)
400 3
600 2
1200 1
U = X2YI = 1800; Py = 2
Find the equation for the demand
curve.
![Page 46: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/46.jpg)
Consumer Demand
XX
Y
U = X2YI = 1800; Py = 2
Px
Px = 3 2 1 400 600 1200
Demand Curve
3
2
1
X = f(Px)
400 3
600 2
1200 1
MUx = 2XY; MUy = X2
MRS = 2Y/X = Px/Py = Px/2
=> Y = (1/4)PxX
I = PxX + PyY
1800 = PxX + (2)(1/4)PxX
= (3/2)PxX
X = 1200/Px
Solve for Y & substitute
![Page 47: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/47.jpg)
Consumer Demand
XX
Y
:
Px
Px = 3 2 1 400 600 1200
Demand Curve
3
2
1
Price-Consumption Curve
U = X2YI = 1800; Py = 2
In this case, consumption of Y is
unaffected by changes in Px. Cross-price
elasticity is zero.
![Page 48: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/48.jpg)
Consumer Demand
XX
Y
Px
X
Px
Price-Consumption Curve Demand Curve
3
2
1
Or, cross-price elasticity can be
positive ...
… with a smaller response in demand.
![Page 49: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/49.jpg)
Consumer Demand
XX
Y
:
Px
Px = 3 2 1 400 600 1200
Demand Curve
3
2
1
Price-Consumption Curve
U = X2YI = 1800; Py = 2
Px
X
![Page 50: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/50.jpg)
Price Elasticity of Demand
Price Elasticity of Demand (Ep) Measures how sensitive quantity demanded is to changes in price.
Demand Equation: Qd = a – bP
Ep = (%Q)/(%P) = Q/Q)/(P/P) = Q/P(P/Q) = -b(P/Q)
Ep < 1 Inelastic: Total expenditure increases as price increases.
Ep > 1 Elastic: Total expenditure decreases as price increases.
Ep = 1 Unit Elastic: Total expenditure doesn’t change
![Page 51: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/51.jpg)
Non-Price Determinants of Demand
What determines consumer demand?
• Preferences • Income• Prices of Related Goods
– Substitutes– Complements
![Page 52: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/52.jpg)
Determinants of Price Elasticity
What determines price elasticity of demand?
• Substitutes (+)• Budget share
– Normal (+)– Inferior ( -)
• Short v long run (+) ex. Oil• Network Effects• Bandwagon and Snob Effects
normal goods have higher elasticities, because income effect reinforces substitution effect.
![Page 53: UNIT I:Theory of the Consumer](https://reader035.vdocuments.us/reader035/viewer/2022081506/56814df7550346895dbb6345/html5/thumbnails/53.jpg)
Next Time
6/29 Theory of the Firm
Pindyck, Ch 6.
Besanko ,Chs 6-7.
or
Varian, Chs 18, 20-21.