convexity - 2 According to the assumption of convexity of...

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ECON 302 Convexity of preferences The convexity assumption states that consumer prefers the bundle (alpha)*A+(1-alpha)*B to Bndles Shelter Food Share of Share of A 5 10 A (alpha) B (1-alpha) B 10 5 0.9 0.1 C1 5.5 9.5 0.8 0.2 C2 6 9 0.7 0.3 C3 6.5 8.5 0.6 0.4 C4 7 8 0.5 0.5 C5 7.5 7.5 0.4 0.6 C6 8 7 0.3 0.7 C7 8.5 6.5 0.2 0.8 C8 9 6 0.1 0.9 C9 9.5 5.5
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Unformatted text preview: 2- According to the assumption of convexity of preferences, they are preferred to A and B. 3- So if we are indifferent between A & B, the indifference curve can't pass through these points & should be below line AB. 4 5 1 2 3 4 5 6 7 8 9 10 11 Food In line that connects these two points *A+(1-alpha)*B where alpha can vary between 0 and 1. o either B or A. 6 7 8 9 10 11 Convexity Shelter A B C1 C2 C3 C4 C5 C6 C7 C8 C9 ndifference curve...
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This note was uploaded on 02/27/2011 for the course ECON 302 taught by Professor Avrin-rad during the Spring '09 term at University of Illinois, Urbana Champaign.

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convexity - 2 According to the assumption of convexity of...

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