Consumer Behavior
- Discuss price elasticity of demand and how it is calculated.
- Explain the usefulness of the total revenue test for price elasticity of demand.
- List the factors that affect price elasticity of demand and describe some applications of price elasticity of demand.
- Describe price elasticity of supply and how it can be applied.
- Apply cross elasticity of demand and income elasticity of demand.
- Define and explain the relationship between total utility, marginal utility, and the law of diminishing marginal utility.
- Describe how rational consumers maximize utility by comparing the marginal utility-to-price ratios of all the products they could possibly purchase.
- Explain how a demand curve can be derived by observing the outcomes of price changes in the utility-maximization model.
- Discuss how the utility-maximization model helps highlight the income and substitution effects of a price change.
- Give examples of several real-world phenomena that can be explained by applying the theory of consumer behavior.
- Relate how the indifference curve model of consumer behavior derives demand curves from budget lines, indifference curves, and utility maximization.
- Define behavioral economics and explain how it contrasts with neoclassical economics.
- Discuss the evidence for the brain being modular, computationally restricted, reliant on heuristics, and prone to various forms of cognitive error.
- Relate how prospect theory helps to explain many consumer behaviors, including framing effects, mental accounting, anchoring, loss aversion, and the endowment effect.
- Describe how time inconsistency and myopia cause people to make suboptimal long-run decisions.
- Define fairness and give examples of how it affects behavior in the economy and in the dictator and ultimatum games.