Lecture 3-5

Lecture 3-5 - Lecture 3/5/09 MUk = MUy Px Py Two Views of...

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Hot Dogs/week Hamburgers/week X Y u have, the smaller will be the amount of that commodity you will give up in order to get more of the other, more plentiful, good Y X Budget Line Lecture 3/5/09 MUk = MUy Px Py Two Views of Utility: 1) Cardinal Utility: utility is measurable, quantifiable, and the differences between two measurements is numerically significant 2) Ordinal Utility: consumer can rank various market baskets with regard to the satisfaction they get Example: Friday night options Going bowling Video games Live music Scrapbook Knitting Union Scrabble Bridge Hypothesis: consumers spend their income in the way that yields the greatest amount of satisfaction or utility Consumer’s Goal: utility maximization Assume: Each consumer has a set of preferences or tastes that are given; given those preferences each consumer chooses those good which maximizes their satisfaction subject to the constraints of income and prices Indifferences Curves:
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This note was uploaded on 04/06/2009 for the course ECON 101 taught by Professor Hansen during the Spring '07 term at Wisconsin.

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Lecture 3-5 - Lecture 3/5/09 MUk = MUy Px Py Two Views of...

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