◆ ECONOMIC FOUNDATIONS
Consumer Theory
Utility, diminishing returns, budget constraints, and indifference curves.
11 articles
FeaturedThe Substitution Effect and Income Effect: Two Reasons Demand Slopes Down
When price rises, consumers buy less for two distinct reasons: the substitution effect (the good is now relatively more expensive) and the income effect (real…
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4 articles
◆ CONSUMER THEORY
The Myth That More Is Always Better: How Diminishing Marginal Utility Works
We assume twice the stuff means twice the satisfaction. Diminishing marginal utility says the second unit is almost always worth less than the first — and the…
◆ CONSUMER THEORY
The Budget Constraint: Where Your Preferences Meet Reality
Preferences are free; affordability is not. The budget constraint is the line where your income and prices decide which wants become real choices.
◆ CONSUMER THEORY
One Price Change, Two Separate Shocks: The Substitution and Income Effects
Any price change hits your wallet in two distinct ways at once. Splitting them apart is one of the most reusable thinking tools in economics.
◆ CONSUMER THEORY
Inside Indifference Curves: What Consumer Preferences Look Like on a Graph
An indifference curve maps every combination of two goods that leaves you equally satisfied. Take it apart piece by piece and consumer choice becomes a picture.