ECON281 Lecture 7: 7

• School: University of Alberta
• Department: Economics
• Course: ECON281
• Professor: Lorne Priemaza

Document Summary

3 dimensional graphs are difficult to graph and understand. In practice, consumer preference is graphed using 2 goods on the x and y axis and. Each indifference curve plots all the goods combinations that yield the same utility; that a person is indifferent between. Completeness => each basket lies on only one indifference curve. Negative slope => when a consumer likes both goods (mua and mub are positive), the indifference curve is downward sloping. Thin curves => indifference curves are not thick . Note that some specialized models produce indifference curves that violate one or more of our assumptions. These models may still be useful, but their violations must always be kept in mind. All along an individual"s indifference curve, an individual consumes different baskets of goods while remaining at the same utility. The individual is willing to substitute one good for another. An individual must be compensated by an increase in one good if the other good decreases.