micro-fall2007-5

# micro-fall2007-5 - Households Preferences Preferences...

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Unformatted text preview: Households Preferences Preferences Comparison between two consumption bundles x and z : x % z x is at least as good as z x & z x is strictly better than z x ¡ z x is exactly as good as z Ani Guerdjikova ECON 313 Fall 2007 60 ¡ 80 Households Preferences Preferences Comparison between two consumption bundles x and z : x % z x is at least as good as z x & z x is strictly better than z x ¡ z x is exactly as good as z Indi/erence curves are used to represent preferences graphically. Ani Guerdjikova ECON 313 Fall 2007 60 ¡ 80 Households Preferences Preferences Comparison between two consumption bundles x and z : x % z x is at least as good as z x & z x is strictly better than z x ¡ z x is exactly as good as z Indi/erence curves are used to represent preferences graphically. Given the budget constraint of the household, it is su¢ cient to know the indi/erence curves of the household in order to determine its optimal decision. Ani Guerdjikova ECON 313 Fall 2007 60 ¡ 80 Households Preferences 6- r r r r x 1 x 2 x z z z 00 x & z z ¡ x x ¡ z 00 Ani Guerdjikova ECON 313 Fall 2007 61 / 80 Households Preferences Marginal rate of substitution MRS = Δ x 2 Δ x 1 = z 2 & x 2 z 1 & x 1 6...
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micro-fall2007-5 - Households Preferences Preferences...

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