MGCR 293 Lecture Notes - Lecture 7: Market Basket, Observable Variable, Marginal Utility
27 Sep 2016
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Market baskets on higher indifference curves are preferred to market baskets on lower indifference curves. Every indifference curve must slope downward and to the right o. In order to remain indifferent between two there is a trade between 2 good, ex: give up units of good y to get more units of good x. only a negative slope can show this relationship. They cannot intersect: why, at the intersection point it means that two market baskets deliver the same utility, this is impossible, higher indifference curve always delivers higher utility. Marginal rate of substitution of product x (horizontal) for product y (vertical axis) is equal to the number of units of product y that must be given up to get an extra unit of product. X and maintain a constant level of utility. To measure : find the slope of the consumer"s indifference curve, multiply this slope by -1.
