071607 - movement causes no change in a person's utility. A...

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Sheet1 --------People strive to make themselves as well-off as possible. Utility: Satisfaction Two types of utility: Cardinal Utility - The utility that we assume can be measured and therefore compared amongst individuals Ordinal Utility - People can tell whether a change makes them better off, worse off, or has no effect. Remember: Utility graphs. An indifference curve (John Hicks) is a curve on the utility graph on which
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Unformatted text preview: movement causes no change in a person's utility. A Budget/Income Constraint: INC = P1 x Q1 + P2 x Q2 This can be rewritten as follows: Q2 = -(P1/P2)Q1 + INC/P2 which translates to y = mx + b y = Q2 m = -P1/P2 x = Q1 b = INC/P2 The line formed by this is called a budget line. This line represents the most of the two items that can be bought. Page 1...
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This note was uploaded on 04/13/2008 for the course ECO 2023 taught by Professor Rush during the Summer '08 term at University of Florida.

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071607 - movement causes no change in a person's utility. A...

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