Constraints Choices and Demand推荐.pdfVIP

Constraints, Choices, 5 and Demand Learning Objectives After reading this chapter, students should be able to: } Demonstrate how price and income aff ect a consumer’s budget line. } Determine a consumer’s best choice based on his preferences and budget line. } Understand how to fi nd a consumer’s best choice by maximizing a util- ity function. } Analyze the effects of changes in prices and income on a consumer’s demand. } Explain how economists determine consumers’ preferences based on their choices. n recent years, the Honda Accord has consistently ranked among the best-selling cars in the United States. Yet if you ask a group of your friends to name their I favorite automobiles, few would place the Accord near the top. It lacks the luxury of a Bentley, the engineering of a Mercedes, the sex appeal of a Ferrari, the sophis- tication of an Aston-Martin, the performance of a Porsche. The Accord is simply a plain-looking car that delivers a safe, comfortable ride with relatively few head- aches. Above all, it’s affordable: the price is reasonable and the maintenance cost is Honda Accord (above) and Ferrari low. The Ferrari Enzo may turn heads, but its $643,330 price tag keeps most buyers Enzo (below) out of the showroom. When the owner of a $23,000 Honda Accord says the Ferrari Enzo is not affordable, his meaning is obvious. Most people just don’t have the nec- essary cash to buy an Enzo. But when he says he can’t afford a $47,000 Mercedes E320, his meaning is probably more subtle. Many Accord owners could purchase more expensive cars. They choose the Accord because they don’t think a fl ashy car is worth the necessary sacrifi ces, which could include working overtime, skipping vacations, or living in a smaller home.