Chapter 11 notes - bChapter 11 Consumer preferences and...

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bChapter 11: Consumer preferences and consumer choice Mapping the Utility Function Indifference Curves An indifference curve is a line that shows all the consumption bundles yielding the same amount of total utility for an individual An individual is indifferent between any two points lying on an indifference curve Indifference curves graph the same amount of utils A collection of indifference curves on the same axis is known as an indfference curve map Properties of Indifference Curves No two individuals have the same indifference curve maps because no two people have the same preferences However, it is believed that every indifference curve has two general characteristics… Indifference curves never cross – they can never cross because each indifference curve graphs a different number of utils thus they can never intersect the farther an indifference curve lies from the origin the higher the level of total utility it indicates- this is justified because we consider more to be better Indifference curves are downward sloping because more is considered to be better Indiffernce curves are convex shaped because of diminishing marginal utility If a good satisfies these four properties of indifference curves it is an ordirnary good Indifference Curves and Consumer Choice The marginal rate of substitution
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