ECON 1B03 Lecture 2: Module 52 - 13.6 Consumer Theory Maximizing Utility 2

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Two goods with straight-line indifference curves are perfect substitutes. You always trade off one good for a fixed amount of another good, regardless of much you have of either good (so the ic doesn"t bow) Two goods with right-angle indifference curves are perfect complements. It doesn"t matter how much more of one good you consume if you consume the goods in a fixed proportion. Having 2 or more right gloves for 1 left glove doesn"t add anything to your total satisfaction from that second glove. Mickey wants to get a combination of hockey and basketball tickets on the highest possible indifference curve to maximize his tu. However, he must also and up on or below his budget constraint (he can only buy as much as he can afford) Since more of a good you like is better, you"ll spend more to buy more: you"ll spend all of your budget and therefore end up on the bc.