Desire refers to an inner feeling that a person wants but has not yet obtained something.

The degree to which consumers satisfy their desires by owning or consuming goods or services is called the utility of goods or services.

Cardinal utility and ordinal utility

total utility and marginal utility

Marginal utility and the law of diminishing returns

If other conditions remain unchanged and the consumer achieves maximum utility satisfaction under the given income constraints and keeps this situation unchanged, then the consumer is said to be in equilibrium, which is referred to as consumer equilibrium.

Derivation of consumer demand curve

shape of demand curve

The difference between the amount that consumers are willing to pay to obtain a certain amount of a commodity and the amount that they actually have to pay is called consumer surplus. It is sometimes also defined as the total utility that consumers obtain from consuming the commodity and the total market The difference between values ​​is the net utility of consuming the good.

Preference refers to how much consumers like a product or product combination.

The indifference curve is a curve drawn by different quantity combinations of goods that can bring the same degree of satisfaction to consumers under given preference conditions.

The marginal substitution rate of one commodity for another commodity is defined as the consumption quantity of another commodity that can be substituted by a consumer increasing the consumption of one unit of one commodity under the condition that the degree of utility satisfaction remains unchanged. This is referred to as marginal substitution. Rate

law of diminishing marginal rate of substitution

Under the conditions of given income and commodity prices, the combination of different quantities of various commodities that consumers can purchase with all their income

Scenario 1: The prices of the two commodities remain unchanged and the consumer’s income changes.

Scenario 2: The consumer's income and the price of the second good remain unchanged, and the price of the first good changes.

Scenario 3 Changes occur at the same time

It can be explained with the help of indifference curves and budget constraints.

(1) Income-consumption expansion line

(2) Engel curve and Engel’s law

(1) Price-consumption expansion line

(2) Consumer demand curve

Under the condition that consumer income and other commodity prices remain unchanged, changes in the price of a commodity will have an impact on consumer demand. This impact is also called the total effect of price changes.

The substitution effect refers to a change in the price of a commodity that causes a change in the relative price of the commodity, thereby causing consumers to adjust the demand for the commodity while maintaining the original utility level.

The income effect refers to the change in consumers' actual income caused by a price change, which leads to the adjustment of consumer demand for goods while keeping the price constant.

Normal products, general low-end products are tilted to the lower right

Giffen goods are tilted upward to the right

NM expected utility function

U(Q)<U(EQ) risk averse

U(Q)=U(EQ) risk neutral

U(Q)>U(EQ)Risk-loving

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