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ECON 2310 (47)
B Ferguson (11)
Chapter 4

Chapter 4- Principles and Preferences.pdf

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University of Guelph
ECON 2310
B Ferguson

Chapter 4- Principles and Preferences September 15, 2013 5:08 PM Definitions Preferences- tells us about a consumer's likes and dislikes Indifferent- a consumer is indifferent between two alternatives when liking (or disliking) them equally Consumption Bundle- the collection of goods that an individual consumes over a given period, such as an hour, a day, a month, a year or a lifetime Indifference Curve- starting with any alternative, an indifference curve shows all the other alternatives that a consumer likes equally well Family of Indifference Curves- a collection of indifference curves that represents the preferences of the same individual Bad- a bad is an object, condition or activity that makes a consumer worse off Marginal Rate of Substitution for X with Y- written is the rate at which a consumer must adjust Y to maintain the same level of well-being when X changes by a tiny amount, from a given starting point Declining MRS- an indifference curve that has a declining MRS if it becomes flatter moving along the curve from the northwest to the southwest Perfect Substitutes- two products are perfect substitutes if their functions are identical, so that a consumer is willing to swap one for the other at a fixed rate Perfect Compliments- two products are perfect compliments if they are valuable only when used together in fixed proportions Utility- a numeric value indicating the consumer's re
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