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Lecture 47

ECON 1010 Lecture 47: Lecture 47

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ECON 1010
Laura K.Brown

o|82 1. For this reason, most indifference curves slope downwards 1. Negative slope 2. Indifference curves do not cross 3. Indifference curves are bowed inward (convex) 1. The slope of an indifference curve is the marginal rate of substitution – the rate at which the consumer is willing to trade off one good for the other 1. The marginal rate of substitution usually depends on the amount of each good the consumer is currently consuming o Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, the indifference curves are bowed inward o Diminishing marginal utility is important (not an equivalent trade off between two items) Two Extreme Examples of Indifference Curves: 1. The shape of an indifference curve tells us about the consumers willingness to trade one good for the other
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