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Rationality of Choices Made by Group of Consumers

In: Microeconomics

Author

Listed:
  • Krzysztof Malaga

    (Poznań University of Economics and Business)

  • Karolina Sobczak

    (Poznań University of Economics and Business)

Abstract

This chapter examines the problem of making decisions by a group of consumers who aiming at utility maximizationProblem ofutility maximization want to chooseOptimalconsumption bundle optimal consumption bundlesConsumption bundle. The topic is presented by means of the simple model of exchangeModelsimple model of exchange, in which prices are not present. Then the chapter deals with this model’s extension called the Arrow-Hurwicz modelModelArrow-Hurwicz modelArrow-Debreu-McKenzie model, in which a set of prices is crucial for analysis. Since prices can change over time this model is discussed in the staticModelstatic as well as in the dynamic approach. The chapter draws attention to such concepts as: Pareto optimal allocationAllocationPareto optimal (Pareto efficient), Walrasian equilibriumWalrasianequilibrium, equilibrium price vectorEquilibriumprice vector and equilibrium allocationAllocationof Walrasian equilibrium. The reader learns whether the equilibrium state exists, when it is reached and then if a set of prices remains in this state.

Suggested Citation

  • Krzysztof Malaga & Karolina Sobczak, 2022. "Rationality of Choices Made by Group of Consumers," Springer Texts in Business and Economics, in: Microeconomics, chapter 0, pages 113-158, Springer.
    • Handle: RePEc:spr:sptchp:978-3-031-10554-8_3
    DOI: 10.1007/978-3-031-10554-8_3
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