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Ch08A - APPENDIX 8 Marginal Utility and Indifference Curves...

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Marginal Utility and Indifference Curves APPENDIX 8
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After studying this chapter you will be able to Explain the connection between utility and indifference curves Explain why maximizing utility is the same as choosing the best affordable point Explain why utility exists
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Two Ways of Describing Preferences The marginal utility model describes preferences by using the concept of utility. The indifference curve model describes preferences by using the concepts of preference and indifference. Figure A8.1 on the next slide illustrates the connection between these two ways of describing preferences.
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Two Ways of Describing Preferences In part (a), you can see the levels of utility derived from each quantity of movies and soda. Three combinations generate 331 units of utility and two combinations generate 313 units of utility. Indifference curves pass through these points.
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Maximizing Utility is Choosing the Best Affordable Point Call the marginal utility of movies MU M .
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