ECO 3343 Lecture Notes - Budget Constraint, Indifference Curve
Document Summary
A curve that shows all combinations of goods that provide an equal level of utility or equal level of satisfaction. The same level of utility which consists of 4 points on the curve. Every level of utility= has its own indifference curve. Individuals seek to have the highest level of utility. Therefore, the individuals seek the highest indifference curve. If there is an intersection of two indifference curves this means that the individual"s behavior is irrational and inconsistent. U(x,y) means that level of utility depends on the levels of the x and y commodities being consumed. Increases in levels of x and y -> increase in utility. When a consumer"s choices are limited by a budget. The total spending of goods and spending may fall short of the budget constraints, but does not exceed it. A budget line will show the different combinations of the two goods that a consumer is able to consume given the budget constraint.
