ECON101 Lecture Notes - Lecture 15: Indifference Curve, Equilibrium Point, Substitute Good

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carmineplatypus987

6 Nov 2018

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

Nafeez Fatima

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ECON101 Lecture Notes - Lecture 14: Demand Curve, Neuroeconomics, Budget Constraint

ECON101 Lecture Notes - Lecture 15: Indifference Curve, Equilibrium Point, Substitute Good

ECON101 Lecture 16: lecture 16

Document Summary

Chapter 8, the theory of consumer choice (a recap): Hypothetical consumer: lisa (rational and self interested) Two prices: pm and pp income : y. S. t. s = pmqm + ppqp = y. Pick the bundle from affordable set that maximizes combined total utility or where marginal utility per $ spent on both goods are equal. Mum divided by pm = mup divided by pp. A rational consumer chooses between bundles of goods by ranking them according to pleasure/satisfaction he/she gets from consuming these bundles. Set of all bundles of goods that a consumer views as being equally desirable. All combinations of the goods that provide the consumer with the same level of utility or satisfaction. Marginal rate of substitution (mrs) is what the diagram above the preference map is called. The rate at which consumer is willing to trade one good for another. Mrs decrease when there"s more of one good. Higher indifference curve is always preferred to lower indifference curves.

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1.	_____	The satisfaction or benefit that consumers receive from consuming goods or services.
2.	________________ _	A particular combination of specific quantities of goods or services
3.	________________ _	Consumers can rank all conceivable bundles of goods or services
4.	_____	If A is preferred to B, and B is preferred to C, then A is always preferred to C.
5.	_____	Equation showing a consumerâs perception of the total utility forthcoming from consuming each bundle of goods and services.
6.	_____	A set of consumption bundles each and every one of which provides a consumer with exactly the same level of total utility.
7.	_____	The number of units of Y that must be given up for total utility to remain the same when one more unit of X is consumed.
8.	_____	The addition to total utility attributable to consuming one more unit of a good, holding the consumption of all other goods constant.
9.	_____	The line showing all bundles of goods that can be purchased at given prices if the entire income is spent.
10.	_____	The change in the consumption of a good that would result if the consumer remained on the original indifference curve after the price of the good changes.
11.	_____	The change in consumption of goods results strictly from the change in purchasing power after the price of a good changes.
12.	________________ _	The sum of the substitution and income effects.
13.	_____	A good for which quantity demanded varies directly with price, causing an upward sloping demand curve.
14.	_____	A list of prices and the corresponding quantity consumers are willing and able to purchase at each price.

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ECON101 Lecture Notes - Lecture 15: Indifference Curve, Equilibrium Point, Substitute Good

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