Model of Consumer Behavior: Constrained Optimization

Ted Black

Consumer Economics

Microeconomics

Interactive Tutorial

The purpose of this Module on Consumer Behavior is to explain income constrained utility maximization. A graphical solution to the optimization process is offered to illustrate the consumers selection of consumption quantities of two available goods given a budget constraint during a fixed time period. The income constrained utility maximizing quantities of the goods are gotten assuming prices and income are predetermined and consumption is subject to satiation. Students are expected to understand graphical depictions of pivotal aspects of the optimization process: indifference curves; the income constraint and; the optimization condition using the slopes of the curve and constraint.