This lesson discusses why and how consumers make certain choices. Based on standard neoclassical theory, students are introduced to the concept of utility, budget constraints, and indifference curves. Given market prices and utility information, students will understand the implicit thought processes that lead to total utility maximization. In cases when individual behaviors do not adhere to the predictions of standard economic theory, the lesson employs behavioral economics to explain how and when consumer choices might be different under certain conditions including limited information, psychological pricing, bounded rationality, nudges, and loss aversion.
Ohio TAG Social and Behavioral Sciences (OSS) Standards
Core OSS004 Outcome: Core skill demonstrated by students who successfully complete a Principles of Microeconomics Course
Standard: Understand basic microeconomics terms and concepts, including scarcity and choice, equilibrium, efficiency and equity, positive and normative economics, comparative advantage, and specialization.