Consumer Choices Summary

Budget Constraint: Shows combinations of two goods affordable given limited income. For instance, a student with 50 to spend on coffee (at 5/cup) and sandwiches (at 10/sandwich) faces a budget constraint on how many of each they can buy.
Total Utility: Satisfaction derived from choices. Example: Eating a first slice of pizza provides high total utility.
Marginal Utility: Additional utility from one more unit of consumption. Example: Eating a second slice of pizza adds more utility, but often less than the first.
Diminishing Marginal Utility: Each additional unit consumed adds less utility than previous units. For example, after three slices, a fourth slice of pizza might add very little additional satisfaction, or even negative utility if one is already full.

Income, prices, and preferences impact consumer choices.
Changes in income or prices shift the budget constraint affecting consumption choices. For example, if a consumer's income increases from 200 to 300, they can afford more goods, shifting their budget constraint outwards.

Choice of normal goods or inferior goods based on income changes.
- Normal Good Example: As income rises, a consumer might buy more organic produce.
- Inferior Good Example: As income rises, a consumer might buy less store-brand ramen noodles.
Price increases lead to rotation of budget constraint and altered consumption patterns. If the price of coffee increases, the budget constraint will pivot inwards along the coffee axis, reducing the maximum amount of coffee achievable.
Substitution Effect: Consumers buy less of higher-priced goods and more of lower-priced goods. For instance, if the price of beef rises, consumers might switch to buying more chicken.
Income Effect: Higher prices reduce buying power, affecting consumption decisions. If the price of gasoline increases significantly, a consumer has less disposable income for other goods, effectively reducing their purchasing power by limiting what they can buy with their remaining income.

Traditional models assume rational decision-making and self-control.
Behavioral economics integrates psychology, highlighting inconsistencies in decision-making.
Decisions influenced by context rather than purely economic factors. For example, people might be more likely to purchase a product when it's presented with a 'limited-time offer' tag, even if the actual economic value or their need for it hasn't changed.

Opportunity cost of education is low during unemployment.
There's a positive correlation between education level and earnings/unemployment rates, illustrated in 2012 data indicating higher degrees correlate with lower unemployment rates. For example, individuals with a Bachelor's degree had a lower unemployment rate and higher median weekly earnings compared to those with only a high school diploma in 2012.