ECON 1000 Chapter Notes - Chapter 9: Indifference Curve

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Andrea Podhorsky

Document Summary

If the price of x increases, the line would get steeper. If the price of x decreases, the line would get shallower. If the price of y increases, line would get shallower. If the price of y decreases, line would get steeper. If you move along an indifference curve, the marginal utility does not change. Marginal rate of substitution (mrs) measures the rate at which a person is willing to give up. Good y to get an additional unit of good x while remaining indifferent between the 2 goods. Mrsx,y = - mux = -px = - y. If slope is relatively steep, mrs is high. If slope is relatively flat, mrs is low. Perfect complements utility derived when one good is consumed with the other good in a certain combination: the curve is l-shaped, no substitution possible. Corner optimum only consuming positive quantities of one good. Interior optimum consuming positive quantities of both goods.