ECON 1 Lecture 14: ECON 1-Lecture 14-Utility and Demand

• School: UCSB
• Department: Economics
• Course: ECON 1
• Professor: Emanuel Vespa

Document Summary

Rank bundles --> utility function (input: burger; output: number) More like bundles --> higher number of utility function. Points on same indifference curve --> same utility number (same line) Indifference curves above --> higher utility number (jump lines) Maximizing utility (vespa, lecture 12, slide 9) Mu tacos: additional utility for consuming one more taco. P tacos: additional money have to pay for getting one more taco. Decrease income (vespa, lecture 12, slide 10) Budget line shift inwards --> jump between indifference curve. Normal good: increase income --> increase demand. Increase price of tacos (vespa, lecture 12, slide 12) Budget line rotates --> jump between indifference curve. + increase income --> shift outwards the budget line --> same indifference curve as there was not any change. Normal good: income effect of increase in price is negative. All goods: substitution effect of increase in price is negative. Indifference curve: a curve representing the combination of goods that make consumer equally well off.