ECON 1 Lecture Notes - Lecture 7: Taco, Marginal Utility, Indifference Curve
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Econ 1 - lecture 7 - budget constraints. a month to spend on burgers and tacos. This line represents the most burgers/tacos we can get per month, we can also get less if we wanted to. We can think of every possible combination of burgers and tacos, and we can rank them based off of andy"s preferences. Bundle = (# of tacos, # of burgers) Utility functions assigns a number to each bundle. U(3,5)>u(4,2) means andy prefers (3,5) to (4,2) U(2,12) is pretty much always preferred compared to u(1,12) Suppose u(2,7) and u(1,12) are equally preferred. Andy is willing to trade 5 burgers for one taco. Marginal utility of boogers is increase in utility for one more burger. Marginal utility of tacos is defined equivalently. Marginal utility of tacos / marginal utility of burgers. How many of one good you are willing to give up to get another.
