ch03 - CHAPTER 3 PREFERENCES AND UTILITY These problems...

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CHAPTER 3 PREFERENCES AND UTILITY These problems provide some practice in examining utility functions by looking at indifference curve maps. The primary focus is on illustrating the notion of a diminishing MRS in various contexts. The concepts of the budget constraint and utility maximization are not used until the next chapter. Comments on Problems 3.1 This problem requires students to graph indifference curves for a variety of functions, some of which do not exhibit a diminishing MRS . 3.2 Introduces the formal definition of quasi-concavity (from Chapter 2) to be applied to the functions in Problem 3.1. 3.3 This problem shows that diminishing marginal utility is not required to obtain a diminishing MRS . All of the functions are monotonic transformations of one another, so this problem illustrates that diminishing MRS is preserved by monotonic transformations, but diminishing marginal utility is not. 3.4 This problem focuses on whether some simple utility functions exhibit convex indifference curves. 3.5 This problem is an exploration of the fixed-proportions utility function. The problem also shows how such problems can be treated as a composite commodity. 3.6 In this problem students are asked to provide a formal, utility-based explanation for a variety of advertising slogans. The purpose is to get students to think mathematically about everyday expressions. 3.7
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This note was uploaded on 11/06/2009 for the course ECON ECON111 taught by Professor Smith during the Spring '09 term at Punjab Engineering College.

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ch03 - CHAPTER 3 PREFERENCES AND UTILITY These problems...

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