(8th edition) (the pearson series in economics) robert pindyck, daniel rubinfeld microecon 113

88 PART 2 • Producers, Consumers, and Competitive Markets
clothing. If both are maximizing, you can tell the value of each person’s MRS
by looking at the prices of the two goods. What you cannot tell, however, is
the quantity of each good purchased, because that decision is determined by
their individual preferences. If the two consumers have different tastes, they
will consume different quantities of food and clothing, even though each MRS
is the same.

E XA MPLE 3.3 DESIGNING NEW AUTOMOBILES (II)
Our analysis of consumer choice allows us to see
how different preferences of consumer groups for
automobiles can affect their purchasing decisions.
Following up on Example 3.1 (page 77), we consider two groups of consumers planning to buy new
cars. Suppose that each consumer has an overall
car budget of $20,000, but has decided to allocate $10,000 to interior size and acceleration and
$10,000 to all the other attributes of a new car. Each
group, however, has different preferences for size
and acceleration.

Size
(cubic feet)
$10,000

Figure 3.14 shows the car-buying budget constraint faced by individuals in each group. Those
in the first group, who are typical of Ford Mustang
coupe owners with preferences similar to those in
Figure 3.7 (page 78), prefer acceleration to size.
By finding the point of tangency between a typical
individual’s indifference curve and the budget constraint, we see that consumers in this group would
prefer to buy a car whose acceleration was worth
$7000 and whose size was worth $3000. Individuals

in the second group, who are typical of Ford

Size
(cubic feet)
$10,000

$7500

$3000

$7000 $10,000
Acceleration (horsepower)
(a)

$2500
$10,000
Acceleration (horsepower)
(b)

F IGURE 3.14

CONSUMER CHOICE OF AUTOMOBILE ATTRIBUTES
The consumers in (a) are willing to trade off a considerable amount of interior space for some additional
acceleration. Given a budget constraint, they will choose a car that emphasizes acceleration. The opposite is
true for consumers in (b).