Ch09-Lecture+Slides

# Ch09-Lecture+Slides - Example Lisas utility level at movies...

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Example: Lisa’s utility level at 𝑥𝑥 movies and 𝑦𝑦 cases of soda is 𝑢𝑢 𝑥𝑥 , 𝑦𝑦 = 𝑢𝑢 𝑃𝑃 𝑥𝑥 + 𝑢𝑢 𝑆𝑆 𝑦𝑦 . The table summarizes 𝑢𝑢 𝑃𝑃 𝑥𝑥 and 𝑢𝑢 𝑆𝑆 𝑦𝑦 . 𝑢𝑢 𝑃𝑃 𝑥𝑥 𝑥𝑥 𝑢𝑢 𝑆𝑆 𝑦𝑦 𝑦𝑦

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The table below summarizes 𝑢𝑢 𝑥𝑥 , 𝑦𝑦 = 𝑢𝑢 𝑃𝑃 𝑥𝑥 + 𝑢𝑢 𝑆𝑆 𝑦𝑦 . Cells highlighted in orange are on Lisa’s budget line. Cells highlighted in gray are above Lisa’s budget line and so they are unaffordable to Lisa. Soda 10 260 310 350 382 410 436 460 482 502 519 535 9 255 305 345 377 405 431 455 477 497 514 530 8 248 298 338 370 398 424 448 470 490 507 523 7 238 288 328 360 388 414 438 460 480 497 513 6 225 275 315 347 375 401 425 447 467 484 500 5 205 255 295 327 355 381 405 427 447 464 480 4 183 233 273 305 333 359 383 405 425 442 458 3 159 209 249 281 309 335 359 381 401 418 434 2 123 173 213 245 273 299 323 345 365 382 398 1 75 125 165 197 225 251 275 297 317 334 350 0 0 50 90 122 150 176 200 222 242 259 275 0 1 2 3 4 5 6 7 8 9 10 Movies
305 260 298 315 273 176 6 7 8 9 10

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The table below summarizes 𝑢𝑢 𝑥𝑥 , 𝑦𝑦 = 𝑢𝑢 𝑃𝑃 𝑥𝑥 + 𝑢𝑢 𝑆𝑆 𝑦𝑦 . Some cells that have the same utility levels are highlighted in different colors. For example, Lisa likes (0,9) and (1,5) equally. She likes (1,6), (6,1), and (10,0) equally. But she likes (1,6) (and so (6,1) and (10,0)) better than (0,9) (and so (1,5)). Soda 10 260 310 350 382 410 436 460 482 502 519 535 9 255 305 345 377 405 431 455 477 497 514 530 8 248 298 338 370 398 424 448 470 490 507 523 7 238 288 328 360 388 414 438 460 480 497 513 6 225 275 315 347 375 401 425 447 467 484 500 5 205 255 295 327 355 381 405 427 447 464 480 4 183 233 273 305 333 359 383 405 425 442 458 3 159 209 249 281 309 335 359 381 401 418 434 2 123 173 213 245 273 299 323 345 365 382 398 1 75 125 165 197 225 251 275 297 317 334 350 0 0 50 90 122 150 176 200 222 242 259 275 0 1 2 3 4 5 6 7 8 9 10 Movies
255 255 225 225 275 275 275 345 345 350 350 398 398 305 305 381 381 480 480 359 359 260 298 315 273 176 6 7 8 9 10

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255 225 225 275 275 350 398 305 260 176 6 7 8 9 10 If we find out Lisa’s utility levels at finer quantities of movies and soda, say, at every 1/10 th of units or 1/100 th of units, we would find out more combinations of movies and soda Lisa likes equally. If you connect all those combinations Lisa likes equally, we would get curves like these …. 275 480 480 398 381 381 359 359 345 350 345 255 298 273 305 315
255 225 225 275 275 350 398 305 260 176 6 7 8 9 10 These are Lisa’s indifference curves . On each indifference curve, utility level is constant, and so Lisa is indifferent between (likes equally) any combinations of movies and soda that are on the same indifference curve.

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