Samenvatting
Summary for Intermediate Microeconomics VUB
- Instelling
- Vrije Universiteit Brussel (VUB)
Summary of Intermediate Microeconomics for BA2 Business Economics at the VUB. Well structured summary without inessential information.
[Meer zien]Voorbeeld 3 van de 27 pagina's
Voorbeeld 3 van de 27 pagina's
In winkelwagenGekoppeld boek
Titel boek:
Auteur(s):
- Uitgave:
- ISBN:
- Druk:
Verkoper
Volgen
Voorbeeld van de inhoud
Frédéric Kröger Intermediate Microeconomics – SummaryIntermediate Microeconomics – Summary
❖ Budget Constraint (Chap 2)
▪ Consumer theory: Consumers choose the “best” bundles of goods they can
afford
• Can “afford” → budget constraint
• “best” → utility and preferences
• Consumption bundle → Objects of consumer choice
o BUDGET CONSTRAINT
o Consumer’s Consumption Bundle (x1, x2)
• (x1, x2) → Quantities of the 2 goods
• (p1, p2) → Prices of the 2 goods
• m → Amount of money
▪ Budget Set ➔ All possible consumption bundles that someone can afford
▪ Budget Constraint ➔ Line representing all combinations of 2 goods a
consumer can buy if he spends all his money
• Two goods are often enough
(Can think of good 2 as being $ that the consumer can use to spend on other goods)
▪ In this case, p2 = 1$ (price of 1$ is 1$)
▪ Good 2 → Composite Good
➔ Abstraction that represents al but one of the goods
o PROPERTIES OF THE BUDGET SET
▪ We can rearrange the budget line to give us the formula :
• m/p2 → Vertical intercept
• m/p1 → Horizontal intercept
• -p1/p2 → Slope
▪ Slope of Budget Line ➔ Rate at which market is willing to “substitute” good
1 for good 2 → Measures the opportunity cost
o HOW THE BUDGET LINE CHANGES
o Changes in Income
▪ Increase m → Parallel shift outward of budget line
▪ Decrease m → Parallel shift inward of budget line
o Changes in Prices (affect the slope)
▪ Increase p1 → │Slope│ increases → Budget line is steeper
o Price and Income changes together
▪ Both prices go up and m goes down
→ intercepts (m/p1, and m/p2) both decrease → Budget line shifts inward
▪ p2 increase > p1 increase → │Slope│ decreases → Budget line is flatter
o TAXES, SUBSIDIES, AND RATIONING
o Tax
▪ Quantity tax ➔ Pay certain amount for each unit of good purchased
• p1 → p1+t → Budget line becomes steeper
▪ Value tax (ad valorem tax) ➔ Tax on value (price) of a good
• p1 → (1+τ)p1
▪ Lump sum tax ➔ Gov takes away some fixed amount of m regardless of
behavior
1
,Frédéric Kröger Intermediate Microeconomics – Summary
• Budget line shifts inward
o Subsidy ➔ Opposite of tax
▪ Quantity subsidy ➔ Give amount depending on amounts purchased
• p1 → p1-s → Budget line is flatter
▪ Ad valorem subsidy ➔ Subsidy based on price of good
▪ Lump sum subsidy ➔ Give amount regardless of behavior
• Budget line shifts outward
o Rationing constraints ➔ Consumption fixed to be no larger than some amount
o Sometimes taxes, subsidies, and rationing are combined
o BUDGET LINE CHANGES
o Perfectly balanced inflation → Doesn’t change anybody’s budget set and cannot
change anybody’s optimal choice
2
, Frédéric Kröger Intermediate Microeconomics – Summary
❖ Preferences (Chap 3)
o CONSUMER PREFERENCES
▪ Preferences have to do with entire bundle of goods not individual goods
▪ Can rank the bundles as to their desirability (preferences)
o Types of preferences
▪ Strictly Preferred ➔ (x1, x2) > (y1, y2)
▪ Indifferent ➔ (x1, x2) ̴(y1, y2)
▪ Weakly Preferred ➔ (x1, x2) ≥ (y1, y2)
o These relations are not independent concepts: are themselves related
▪ If (x1, x2) ≥ (y1, y2) and (y1, y2) ≥ (x1, x2) → (x1, x2) ̴(y1, y2)
▪ If (x1, x2) ≥ (y1, y2) and not indifferent → (x1, x2) > (y1, y2)
o ASSUMPTIONS ABOUT PREFERENCES
o 3 fundamental assumptions (axioms):
▪ Complete
• Any 2 bundles can be compared
▪ Reflexive
• Any bundle is at least as good as itself
▪ Transitive
• If (x1, x2) ≥ (y1, y2) and (y1, y2) ≥ (z1, z2) → (x1, x2) ≥ (z1, z2)
o INDIFFERENCE CURVES
o Indifference Curve ➔ Connects points representing different bundles btw which the
consumer is indifferent → Same level of utility
▪ 2 curves representing distinct levels of preference cannot cross
o Indifference Map ➔ Multiple indifference curves showing different levels of utility
o Weakly Preferred Set ➔ Area of all bundles that are at least as good as the bundle
o EXAMPLES OF PREFERENCES
o Perfect Substitutes
▪ Consumer is willing to substitute one good for another at constant rate
Ex. Only care about number of pencils not their colour
▪ Indifference curve → Constant Slope
▪ Utility function → U(x1, x2) = x1 + x2
o Perfect Complements
▪ Goods are always consumed together in fixed proportions
Ex. Right shoes and left shoes, 2 teaspoons of sugar per cup of tea
▪ Prefers to consume in fixed proportion (proportion not always one-to-one)
▪ Indifference curve → L shaped
o Bads
▪ Commodity that the consumer doesn’t like
Ex. Loves pepperoni but dislikes anchovies
▪ Indifference curve → Sloping up and to the right
o Neutrals
▪ Goods consumer doesn’t care about in one way or another
Ex. Loves pepperoni but neutral about anchovies
▪ Indifference curve → Vertical line
3
Voordelen van het kopen van samenvattingen bij Stuvia op een rij:
√ Verzekerd van kwaliteit door reviews
Stuvia-klanten hebben meer dan 700.000 samenvattingen beoordeeld. Zo weet je zeker dat je de beste documenten koopt!
Snel en makkelijk kopen
Je betaalt supersnel en eenmalig met iDeal, Bancontact of creditcard voor de samenvatting. Zonder lidmaatschap.
Focus op de essentie
Samenvattingen worden geschreven voor en door anderen. Daarom zijn de samenvattingen altijd betrouwbaar en actueel. Zo kom je snel tot de kern!
Veelgestelde vragen
Wat krijg ik als ik dit document koop?
Je krijgt een PDF, die direct beschikbaar is na je aankoop. Het gekochte document is altijd, overal en oneindig toegankelijk via je profiel.
Tevredenheidsgarantie: hoe werkt dat?
Onze tevredenheidsgarantie zorgt ervoor dat je altijd een studiedocument vindt dat goed bij je past. Je vult een formulier in en onze klantenservice regelt de rest.
Van wie koop ik deze samenvatting?
Stuvia is een marktplaats, je koop dit document dus niet van ons, maar van verkoper frdrickrger. Stuvia faciliteert de betaling aan de verkoper.
Zit ik meteen vast aan een abonnement?
Nee, je koopt alleen deze samenvatting voor €4,98. Je zit daarna nergens aan vast.
Is Stuvia te vertrouwen?
4,6 sterren op Google & Trustpilot (+1000 reviews)
Afgelopen 30 dagen zijn er 50843 samenvattingen verkocht
Opgericht in 2010, al 14 jaar dé plek om samenvattingen te kopen