BSEN 401 Lecture Notes - Indifference Curve
Document Summary
For every pair of consumption bundles (x1, y1) and (x0, y0), (x1, y1) (x0, y0) or (x0, Y0) (x1, y1) or (x1, y1) ~ (x0, y0) i. e. the consumer prefers one or other bundle or is indifferent between them. If both x1 or y1 are at least equal to x0 or y0 respectively and at least one of x1 or y1 is a greater amount than x1 or y1 respectively, then (x1, y1) (x0, y0) This assumption is sometimes called the monotonicity of preferences: convex. The less one has of a good, the more one requires of the other good in exchange to remain indifferent. [assumption 1 follows from the assumption that economic agents are rational. Assumption 2 is actually an assumption since transitivity need not necessarily hold. Indeed, transitivity for groups of individuals often does not hold. Assumption 3 and 4 are actually assumptions about well-behaved indifference curves.