204_summer_2009_lecture_3

204_summer_2009_lecture_3 - University of Toronto...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
University of Toronto Department of Economics ECO 204 Summer 2009 Sayed Ajaz Hussain Lecture 3 1 Ajaz Hussain. Department of Economics
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Last Time ± Scientific modeling in Economics ± Consumption set ± Representing preferences ² , , ~ ² Rational preferences ² Convex preferences ² Monotone preferences ± Felicity surfaces ± Utility function Ajaz Hussain. Department of Economics 2 f ~ f
Background image of page 2
Today ± Some interesting utility functions ± Graphing indifference curves ± Marginal rate of substitution ² Interpretation and application ± Monotonic transformations ± Non convex preferences ± Modeling some preferences ± Utility maximization problem (UMP) ² Optimal choice ² Sensitivity analysis 3 Ajaz Hussain. Department of Economics
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Some Utility Functions ± Linear utility function: ² U = α Q 1 + β Q 2 ± Cobb Douglas utility function: ² U = Q 1 α Q 2 β ± Complements utility function: ² U = min( α Q 1 , β Q 2 ) ± Quasi Linear utility function: ² U = Q 1 + f(Q 2 ) ± CES utility function: ² U = [ ρ Q 1 + ρ Q 2 ] 1/ ρ ± See HW 2 whether these represent rational, convex, monotone preferences Ajaz Hussain. Department of Economics 4
Background image of page 4
Utility Functions: Discussion ± Graphing indifference curves ± Marginal rate of substitution (MRS) ² Goods 1 vs. 2: likes and dislikes ² Advertising ² Segmentation ± Monotonic transformations ² Log transformation ± Non convex preferences ± Modeling some preferences Ajaz Hussain. Department of Economics 5
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Graphing Indifference Curves ± Recall felicity plots from lecture 2 ± Contours correspond to felicity ‐‐ utility–leve l ² “indifference curves” ± To graph these: ²
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/02/2011 for the course ECO 204 taught by Professor Hussein during the Fall '08 term at University of Toronto.

Page1 / 20

204_summer_2009_lecture_3 - University of Toronto...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online