(BQ) Part 2 book "Microeconomics" has contents: Utility and demand; possibilities, preferences, and choices; organizing production; output and costs, perfect competition, monopoly, monopolistic competition, oligopoly, public choices and public goods,.and other contents. | P ART Th ree Households’ Choices 8 After studying this chapter, you will be able to: ◆ Explain the limits to consumption and describe preferences using the concept of utility ◆ Explain the marginal utility theory of consumer choice ◆ Use marginal utility theory to predict the effects of changes in prices and incomes and to explain the paradox of value ◆ Describe some new ways of explaining consumer choices Utility and Demand ◆ You want Adele’s album 21. Will you buy a CD for $, or will you download it for $ What determines our choices about how we buy recorded music? You know that diamonds are expensive and w ater is cheap. Doesn‘t that seem odd? Why do we place a higher value on useless diamonds than on essential-to-life water? The theory of consumer choice that you’re going to study in this chapter answers questions like the ones we’ve just posed. Reading Between the Lines at the end of the chapter applies what you learn to a debate about whether sugary drinks should be banned or taxed to discourge their consumption. 177 178 Chapter 8 Utility and Demand ◆ Consumption Choices ■ ■ Consumption possibilities Preferences Figure Lisa’s Budget Line Soda (cases per month) The choices that you make as a buyer of goods and services—your consumption choices—are influenced by many factors. We can summarize them under two broad headings: 10 A Income $40 Movies $8 each Soda $4 a case B 8 Unaffordable C 6 Consumption Possibilities Your consumption possibilities are all the things that you can afford to buy. You can afford many different combinations of goods and services, but they are all limited by your income and by the prices that you must pay. For example, you might decide to spend a big part of your income on a gym membership and personal trainer and little on movies and music, or you might spend lots on movies and music and use the free gym at school. The easiest way to .
