英文版微观经济学复习提纲Chapter 6. Consumer choice and behavioural economics.pdf

6 Consumer Choice and Behavioural Economics Chapter Summary Economists assume that consumers act in a rational way when they make decisions by spending their income to maximise utility. The marginal utility a person receives from consuming an additional unit of a good or service will diminish as more is consumed in a given period of time. Consumers maximise their utility when the marginal utility per dollar for each good consumed is equal. Demand curves slope downward because of the income and substitution effects from a change in price. For normal goods, the income and substitution effects both lead consumers to buy more of a good after its price falls. For inferior goods, the income effect from a price decrease causes a decrease in quantity demanded, whereas the substitution effect causes quantity demanded to increase. Although it is possible for the income effect to be greater than the substitution effect for an inferior good (Giffen goods have this characteristic) the substitution effect is almost always greater. Social factors affect consumer choices. Celebrity endorsements have long been used by firms to induce consumers to buy their products because some consumers want to buy what others have bought. There are network externalities in the consumption of a product if the usefulness of the product increases with the number of people who use it. Network externalities may result in consumers buying products that contain inferior technologies if they create significant switching costs. Once a product becomes established, consumers may find it too costly to switch to a new product with better technology (even experts may have difficul