disc2 - DISCUSSION SECTION 2 Preferences ( x1 , x 2 ) f (...

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DISCUSSION SECTION 2 Preferences ) , ( ) , ( 2 1 2 1 y y x x f : Strict preference ) , ( ~ ) , ( 2 1 2 1 y y x x : Indifference ) , ( ~ ) , ( 2 1 2 1 y y x x f : Weak preference --------------------------------------------------------------------------------------------------------------------- Axioms about consumer preferences 1. Complete 2. Reflexive 3. Transitive Indifference curves is a graphical representation of preferences. An indifference curve containing x’ is the set of all bundles equally preferred to x’. Q1. Which of the following is not a characteristic of normal (well-behaved) indifference curves (ICs)? A. ICs for different levels of utility can never intersect. B. ICs are downward sloping. C. The slope at any point of an IC gives the total utility provided by the combinations of goods at those points. D. There is an IC through every point, describing utility levels for every possible combination of goods. E. Each IC represents a different but constant level of satisfaction. --------------------------------------------------------------------------------------------------------------------- When more of a commodity is always preferred, the commodity is a good When less of a commodity is always preferred, the commodity is a bad . --------------------------------------------------------------------------------------------------------------------- QUESTION 2 Use a coordinate system with ice cream measured on the horizontal axis and cheesecake on the vertical one to illustrate your preferences by plotting indifference curves if a) You like both ice cream and cheesecake a lot. b) You like ice cream, but you hate cheesecake
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This note was uploaded on 08/08/2008 for the course ECON 301 taught by Professor Hansen during the Spring '08 term at University of Wisconsin Colleges Online.

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disc2 - DISCUSSION SECTION 2 Preferences ( x1 , x 2 ) f (...

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