Economics 2150A/B Study Guide - Midterm Guide: Switching Barriers, Production Function, Utility

• School: Western University
• Department: Economics
• Course: Economics 2150A/B
• Professor: Irene Trela

Document Summary

Shows each optimal basket for different prices of x. Hold all other prices and income constant. Is combination of each intersecting budget line and indifference curve point. Axis is y (units based on income) and x (units) demand curve. Compares px (price of x) and x (units purchased) Is based off of indifference curves (preferences) Shows willingness to pay how to show consumers choice for a good varies when price changes. Demand curve demand curve for cobb douglas. Since cobb douglas is an interior solution, we know optimal choice is: on budget line for cobb douglas (pxx + pyy=i, point of tangency (mux/muy=px/py=y/x) Use demand functions for x and y to create an equation for demand. D is exponent on y demand curve for perfect complements. Since interior solution we know optimal choice is: If u=min(ax,by) in perfect complements, ray is y=a/bx. B is coef cient of y demand curve for perfect substitutes.