Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 7 Topics for Further Study
Chapter 21 of 36 The Theory of Consumer Choice
Section 2 of 26
…
Because we each have limited financial resources we cannot buy everything we want, therefore we
· consider the prices of various goods
· then buy a combination bundle of goods that best suits our needs and wants
Here we will develop the theory of consumer choice, which gives insights into how consumers make buying decisions.
…
Previously we have summarized consumers' decisions using the demand curve.
The demand curve for a good reflects consumers' willingness to buy.
When the price of a good rises consumers want to buy fewer units, the quantity demanded falls.
Here we will look in more detail at the decisions that create the demand curve.
…
Restated from Chapter 1, the Ten Principles of Economics:
1: people face trade-offs
2: the cost of something is what you give up to get it
3: rational people think at the margin
4: people respond to incentives
5: trade can make everyone better off
6: markets are usually a good way to organize economic activity
7: governments can sometimes improve market outcomes
8: a country's standard of living depends on its ability to produce goods and services
9: prices rise when the government issues too much money
10: society faces a short-run trade-off between inflation and unemployment
…
One of the ten principles of economics, #1: people face trade-offs.
The theory of consumer choice examines trade-offs people face as consumers.
When consumers buy more of one good, they can afford less of other goods.
When they spend more time enjoying leisure and less time working, they have lower income and can afford less consumption.
When they spend more of their income in the present and save less, they must accept a lower level of future consumption.
…
The theory of consumer choice examines how consumers facing these trade-offs make decisions respond to changes in their environment.
After developing the basic theory of consumer choice, we apply it to three questions about household decisions
· do all demand curves slope downward?
· how do wages affect labor supply?
· how do interest rates affect household saving?
… …
household saving
kakei chochiku
家計貯蓄

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