consumer - Econ 100A: Intermediate Microeconomics...

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Econ 100A: Intermediate Microeconomics Supplement Slides Winter 2010 (UCSC) Consumer Theory Winter 2010 1 / 11
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Consumer Preferences Assumptions: Consumer preferences are: Complete: Any two bundles can be compared. Re&exive: Any bundle is atleast as good as itself. Transitive: If bundle A is better than B and B is better than C, than A has to be better than C. Indi/erence curve describes a set of personal preferences. Graph showing di/erent bundle of goods for which the consumer is indi/erent. An indi/erence curve depicts same level of utility. Figure 3.1 in textbook (UCSC) Consumer Theory Winter 2010 2 ± 11
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Examples of Preferences The following are some examples of di/erent types of preferences: Perfect substitutes: (straight line indi/erence curves with slope of -1) Example: Gasoline and Diesel. Perfect Complements: (L- shaped indi/erence curves) Example: Right shoe and Left shoe Bads: Pollution. More of it makes you worse o/ Neutral goods: Consumption of the good does not increase utility level Satiation: Bliss point: Further away from it, lesser the utility. These can be represented by indi/erence curves of various shapes. (UCSC) Consumer Theory Winter 2010 3 ± 11
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Marginal Rate of Substitution In this course, our indi/erence curves will be typically downward sloping.
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This note was uploaded on 03/16/2010 for the course ECON 100A taught by Professor Justinmarion during the Spring '08 term at University of California, Santa Cruz.

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consumer - Econ 100A: Intermediate Microeconomics...

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