Consumer Theory Scheme

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Consumer Theory Scheme par Mind Map: Consumer Theory Scheme

1. Topic 1.Preferences

1.1. Relationships of preference

1.1.1. Used in an ordinal way

1.2. Axioms of preferences

1.2.1. A1.Completeness

1.2.1.1. Implication1: For every bundle there is at least one indifference curve

1.2.1.2. Implication 2: every bundle can be ordered.

1.2.2. A2. Transitivity

1.2.2.1. Implication 1: Indifference curves can’t be cut

1.2.2.2. Implication 2: Indifference curve don’t cycle

1.2.3. A3.Monotonicity

1.2.3.1. Implication 1: Indifference curves don’t have area

1.2.3.2. Implication 2: indifference curves are decreasing

1.2.3.3. Implication 3: Bundles with indifference curves more far from the origin are prefferred

1.2.3.4. Implication 4: In the consumer equilibrium, the consumer spends all his rent.

1.2.4. A4. Continuity

1.2.4.1. Implication 1. If transitivity and completeness are satisfied, continuity garanties that solutions for the consumer equilibrium will be obtained.

1.2.5. A5. Convexity

1.2.5.1. Implication 1. Average is prefferred to extremes. The consumer prefers to consume equilibriate quantities of goods than extreme combinations of the goods

1.3. Utility functions

1.3.1. Represented by indifference curve maps

1.3.1.1. Indifference curve slope represents:

1.3.1.1.1. RMS= umgx/umgy

1.3.2. Types of utility functions

1.3.2.1. Cobb Douglas

1.3.2.2. Perfect substitutes

1.3.2.3. Perfect complemetns

1.3.2.4. Quasilinear

1.3.2.5. Bads

1.3.2.6. Neutral goods

1.3.2.7. Saciety

1.3.2.8. Concave preferences

1.3.2.9. Lexicographic

1.3.2.10. Pareto

2. Topic 2. Budget restriction