Economics 2150A/B Lecture Notes - Indifference Curve, Utility, Monotonic Function

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ECON 2150A/B Full Course Notes

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It"s the rate at which a consumer is willing to give up one good to get another, while staying indifferent. How many units of y consumer is willing to give up (get) to get (give up) one unit of x, while staying indifferent. It"s the negative of the slope of the indifference curve. (tangent) Mrs may change as the bundle changes. This occurs as you increase x and decrease y willing to trade more and more for y for one unit of x. The slope of the indifference curve gets steeper. This occurs as you increase x and decrease y willing to trade less and less y for one more unit of x. As x goes up, |mrs| goes up. The slope of the indifference curve gets flatter. Always willing to trade the same amount of y for x, at any bundle. Satiation point: level of consumption where a good could change to a bad or neutral.

Related Questions

18. Which of the following statements is false? A) A consumer possesses a preference map. B) An indifference curve is a line that shows combinations of goods among which a consumer is indifferent. C) A consumer has only one indifference curve. D) The marginal rate of substitution is the rate at which a consumer will give up good y to get an additional unit of good x and remain on the same indifference curve. E) If the indifference curve is steep, the marginal rate of substitution is high.

Suppose all consumers are maximizing utility with convex indifference curves. All face the same prices, and are perfectly rational. According to microeconomic models, at the maximization bundle they should

A. All have the same marginal rate of substitution

B. All buy more of the least expensive good

C. All end up with the same bundle of goods

D. All have the same level of satisfaction

Consider an indifference map with food on the vertical axis and shelter on the horizontal axis.

If a consumer is willing to give up 3 units of food in exchange for 1 unit of shelter and food is priced at $5 per unit and shelter at $10 per unit, then the consumer is:

A. Purchasing too much food for utility maximization

B. Purchasing too much shelter for utility maximization

C. Purchasing just the right amount of each good for utility maximization

D. Purchasing less than the budget would allow

If a consumer with convex indifference curves moves along her budget line, closer and closer to the horizontal axis, as she is moving:

		A. The marginal utility she gets from good Y declines.
		B. The marginal utility she gets from good X declines.
		C. The marginal utility she gets from good X increases.
		D. The price ratio of the two goods changes.

Microeconomics Four-part multiple choice question with an explanation. Give a short explanation for each part regarding how your answer is computed or why your answer is correct.

Part A.

Para mi volunteers at a homeless shelter. It takes a lot of her time, and thus she sometimes takes off time from her job to do the volunteer work. Parami's behavior can be explained by:

	overconfidence.
	a framing bias.
	altruism.
	overvaluing the present relative to the future.

Part B.

Indifference curves cannot be concave to the origin because:

	consumers generally will prefer to have more of a good than less of a good.
	the satisfaction consumers get from consuming additional units of a good decline.
	the substitution effect holds across indifference curves.
	consumers must give up more of one good to obtain more of another good.

Part C.

Marginal utility analysis and indifference curve analysis are both used to:

	compute comparative advantage.
	derive supply curves.
	derive demand curves.
	analyze the total revenue.

Part D.

Indifference curves:

	represent a set of product bundles to which a consumer is indifferent.
	slope up and to the right.
	show the difference between the marginal utilities of two different goods.
	are concave to the origin.

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Economics 2150A/B Lecture Notes - Indifference Curve, Utility, Monotonic Function

ECON 2150A/B Full Course Notes

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