Consumers
Microeconomic Analysis
Keep in Your mind
- Economics is the study of relationships that shape/influence/determine the economy
This is an extremely broad set of relationships!
- When we model consumers, we're thinking about modeling decisions that go beyond the typical setting of an individual purchases goods in a supermarket
- We want to be able to model career decisions, saving decisions, geopolitical decisions
Fundamentals
Choice Set
\textcolor{blue}{\mathcal{X}}
The set that contains all possible options
- For a college senior, it might be the set of jobs available to recent graduates
- For a kid, it might be the set of baseball bats sold at a sporting goods store
- For policy makers, it might be the fraction of income that individuals are required to pay for housing when using a voucher
Often, we'll find it easier to consider everyone having the same choice set
The constraint function
\textcolor{blue}{F} :: \mathcal{X} \to \{0, 1\}
Is a function that indicates whether a possible choice is feasible
Feasible
- You have access to the technology which enables you to send a text message
- You can afford to pay for the dinner at a restaurant
- You are aware that certain housing options exists
In addition to income or financial constraints, people often face constraints related to access to technology and information