Assignment One – ECN5402

Assignment One – ECN5402

Economists use the economic theory of choice to develop the notion of market demand.  The principle assumption upon which the theory of consumer behavior and demand is built is: a consumer attempts to allocate his/her limited money income among available goods and service so as to maximize his/her utility.

This process requires an in-depth examination of the ways economists model individual preferences, which are usually referred to by the formal term utility.  Spoken words, graphs, and mathematical tools are used to conceptualize utility, which also enable economists to show the various exchanges that individuals are willing to make voluntarily.

            Use both mathematical and intuitive analyses to indicate the insights that the concept of utility maximization provides about economic behavior (utility functions).  Use the model of utility maximization to investigate how individuals will respond to changes in their circumstances (changes in income and market prices).  Use the basic economic theory of consumer choice to determine the location and shape of a demand curve and identify the factors that might cause it to shift to a new position.

This assignment requires a comprehensive analysis of the Theories of Consumer behavior (Choice), the Ordinal Theory of Consumer Choice and the Cardinal Theory of Consumer Choice.  Your responses must cover all the different aspects of the Theories of Consumer Behavior stating with the assumptions of the models and end with the derivation of a Marshallian Demand Curve and a Hicksian Demand Curve.

The length of your discussions should be within fifteen pages long.  Please avoid large fonts (more than 12) .

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