The Theory of Individual Behavior

Thai Seafood Company Asks Government

to Solve Labor Shortage Crisis
Pacific Fish Processing Co. (PFP) specializes in
the processing of frozen seafood and fish paste
commonly known as Surimi.
In the meantime, PFP remedied for the shortage
by extending the work hours of its 200
employees and offering overtime pay.

 Why did PFP choose to institute overtime pay

rather than simply raising the wage rate in an
attempt to attract more workers?

Consumer Behavior
A consumer is an individual who purchases goods
and services from firms for the purpose of
consumption.
In characterizing consumer behavior, there are
two important but distinct factors to consider :
1. Consumer opportunities
2. Consumer preferences

Constraints
In making decisions, individuals face constraints.
There are legal constraints, time constraints, physical
constraint, and, of course, budget constraints.
A. The Budget Constraint
. Budget Set
. Budget Line
B. Changes in Income
. Depends on market prices
. Consumers income
C. Changes in Prices

Consumer Equilibrium
The equilibrium consumption bundle is the
affordable bundle that yields the greatest
satisfaction to the consumer.
The objective of the consumer is to choose the
consumption bundle that maximizes his or her
utility, or satisfaction.

Comparative Statics
1. Price Changes and Consumer Behavior
. Price changes might occur because of updated
pricing strategies within your own firm.
2. Income Changes and Consumer Behavior
. A change in income also will lead to a change in the
consumption patterns of consumers.
3. Subtitution and Income Effects
. The consumer will be worse off after the price
increase.

Applications Of Indifference Curve Analysis

1. Choices by Consumers
. Buy One, Get One Free
. Cash Gifts, In-Kind
Certificates

Gifts,

and

Gift

2. Choices by Workers and Managers

. A Simplified Model of Income-Leisure
Choice
. The Decision of Managers

The Relationship Between Indifference

Curve Analysis And Demand Curves
1. Individual Demand
2. Market Demand
. Horizontal summation of individual
demand curves and indicates the total
quantity all consumers in the market would
purchase at each possible price.

Individual Demand

Market Demand

Answering The Headline

Why did PFP choose to institute overtime pay
rather than simply raising the wage rate in an
attempt to attract more workers?
While the fact that the food-processing industry
faces a shortage of 1 million workers may suggest
that raising wages would be uneffective, one can
argue that higher wages could attract workers
earning relatively lower wages in other related or
unrelated sectors. However, hiring inexperienced
workers would not solve PFPs problem.