ECON 201 Lecture Notes - Budget Constraint, Delaware Route 10, Engel Curve
22 Nov 2012
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Indifference curve (ic) analysis: assumption, utility is ordinarily measurable, indifference between bundles may exist, more is preferred to less. Ic definition a curve showing combinations of 2 goods that give the consumer the same level of satisfaction. 4: marginal rate of substitution (mrs) the rate at which a consumer is willing to trade one good for another whil staying at the same level of satisfaction. Mrs is the slope of an ic: properties, downward sloping, convex to origin (bowed inward) Issue of relative scarcity: ics further from origin preferred to those closer to origin (cf graphe) Icmax set of ics: ics are individualized, ics cannot be summed, if tasks change, ics change, buget line (bl, example. Optimal- occurs at tangency between the bl & an ic. Income consumption curve (icc) connects equilibrium when income changes (cf graphe: engel curve plot income vs quantity demanded (cf graphe, changes in price, general case start with b, px,py, then px doubles, triple.
