ECO206Y1 Lecture : Topic 1 - Preferences

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jadesalmon88

28 Sep 2011

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Topic 1 preference (lecture 2 sept 21st) Puzzles (intro to consumer choices: individuals in need receive voucher"s (housing, food) or cash w/no restrictions with respect to use; Q: which one is more preferable: cell phone company setting up pricing program: Plan 1: fixed sum, w/unlimited minutes & data; Plan 2: fixed sum, w/ x # of minutes & y # of data, and charge you for additional units; Plan 3: no fixed sum, charge per unit; - suppose n goods, defined by x1, x2, , xn. - consumers would be able to compare goods in two bundles, be able to rank/weigh these goods from. - common that preferences for different customers are different (different values) - x y consumer strictly prefers x to y. - x y consumer is indifferent between x and y. - x = y consumer weakly prefers x to y or consumer prefer x to y or indifferent .

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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.

blushwildebeest943

A consumer has preferences over two goods: x and y. Three bundles, which all lie on the same indifference curve for this consumer, are shown in the following table.

Bundle	x	y
A	2	8
B	2	2
C	6	2

Which of the following statements regarding these bundles is correct?

		The goods are perfect substitutes for this consumer.
		The goods are perfect complements for this consumer.
		These bundles violate the property that indifference curves are bowed inward.
		These bundles violate the property that indifference curves do not cross.

A. True, False, Uncertain and Explain: determine whether the statement is true, false or uncertain and explain your reasoning â you only earn points for your explanation. 1. If preferences are convex, the set of points at least as good as any given point is a convex set. 2. If preferences are strictly convex, the set of points âno better thanâ any given point is a convex set. 3. If a consumer has strictly convex preferences over two goods and she is indifferent between bundle A given by (4, 6) and bundle B given by (2, 8), then she prefers bundle C given by (3, 7) over either bundle A or bundle B. 4. If a consumer has preferences over two "bads" then these preferences cannot be convex. 5. If apples (a good) are on the horizontal axis and dirty socks (a bad) are on the vertical axis then the indifference curves that represent convex preferences over these two items is upward sloping and flattens out as moving from left to right. 6. If preferences are not monotonic then they cannot be transitive

ECO206Y1 Lecture : Topic 1 - Preferences

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