I have an exam in intermediate microeconomics coming up Cons

I have an exam in intermediate microeconomics coming up. Consumer theory and Producer theory. (I believe equivalnt to Econ 301 in most places).

This is a more general question: Can you provide with some study tips? ways to develop method to excel the exam?

Solution

Similarity and Differences between Consumer & Producer Theory:

a) Consumer purchases commodities to obtain satisfaction, i.e. utility. The firm purchases inputs to produce outputs.

b) The consumer has a ‘utility function’. The firm has a ‘production function’.

c) The consumer’s budget line or equation is a linear function of the amount of commodities purchased. The firm’s cost function or equation is a linear function of the amounts of inputs purchased.

d) Rationality implies the consumer maximizes utility. Rationality implies the firm maximizes profits.

e) The utility function is subjective and ordinal with no unambiguous cardinal measure. The production function is objective and output can be measured in cardinal terms.

f) The consumer maximizes utility subject to an income constraint. The firm maximizes profits subject to a cost constraint but costs are variable.