Class02_25

# Class02_25 - Class Notes(cover part of Chapter 8 in the...

This preview shows pages 1–3. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 02/25/2008 Class Notes (cover part of Chapter 8 in the textbook) Class Outline • Preference and Indifference Curves • Predicting Consumer Behavior Preference and Indifference Curves Peter consumes Beers and Donuts. We can ask Peter to rank all the possible bundles of beers and donuts into three groups: preferred, indifferent and not preferred. He will do so according to his preferences. Suppose he tells us that he is just happy to consume 2 donuts and 6 beers as to consume 6 donuts and 1.5 beers. And he also tell us that all the combinations of beers and donuts on the curve I in the graph below provide the same total utility as A and B. Graphically : 1 I represent one of Peter’s indifference curves. Def. Indifference Curve An indifference curve is a curve that shows combinations of goods among which a consumer is indifferent. • All the combinations of donuts and beers above I are preferred to those on the indifference curve • All the combinations of donuts and beers below I are not preferred to those on the indifference curve • I is only one of a whole family of such curve: I 6 1.5 A B q D q B 2 6 2 ⇒...
View Full Document

## This note was uploaded on 04/29/2008 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue.

### Page1 / 8

Class02_25 - Class Notes(cover part of Chapter 8 in the...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online