ECON 1 Lecture Notes - Lecture 7: Taco, 2 On, Marginal Utility
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Model of household budget decisions (constraints, what"s possible) per month to spend on burgers and tacos. On the line, will use all of income. Of all possibilities, not necessarily what they want. Slope = price of tacos price of burgers. Cost of 1 more taco = 0. 5 burgers. Bundle = (# of tacos, # of burgers) Utility function: descriptions of what bundles are preferred, assigns a number to each number. This means that andy prefers (3,5) bundle to (4,2) bundle. Indifference: when both bundles have the same utility, through the utility function. Andy willing to trade 5 burgers for 1 taco. Marginal utility of burgers is increase in utility for one more burger. How much extra utility, pushing bundles up into the rankings. Andy"s marginal utility of tacos is 10, and burgers is 5. Andy"s marginal utility of tacos is 5, and burgers is 10. How many burgers would he give up to get one more taco? (2)
