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consumer2

# consumer2 - Econ 100A Intermediate Microeconomics...

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Econ 100A: Intermediate Microeconomics Supplement Slides Winter 2010 (UCSC) Consumer Theory 2 Winter 2010 1 / 14

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Di/erent Types of Utility Functions: The following are some of the utility functions you will encounter in the course: Perfect complements Perfect substitutes Cobb-Douglas Quasilinear utility functions (UCSC) Consumer Theory 2 Winter 2010 2 ± 14
Perfect Complements X Y U U Perfect complements: L-shaped indi/erence curves Right shoe and Left shoe: If we purchase one right shoe, we need to purchase one left shoe also. x = y = m p x + p y . (UCSC) Consumer Theory 2 Winter 2010 3 ± 14

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Perfect Substitutes U1 U2 Budget line Y X Consider the above graph: Budget constraint is steeper than indi/erence curves. Suppose we have two goods, Pepsi ( X ) and Coke ( Y ) . Which good would you purchase? Purchasing Coke will put you on a higher indi/erence curve. The budget line is tangent to a higher indi/erence curve at the y axis , than it is at the x axis . (UCSC) Consumer Theory 2 Winter 2010 4 ± 14
Perfect Substitutes U2 U1 Budget line X Y Consider the above graph: Budget constraint is

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consumer2 - Econ 100A Intermediate Microeconomics...

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