CHAPTER 3A UTILITY FUNCTION

CHAPTER 3A UTILITY FUNCTION - • INDIFFERENCE CURVE IS THE...

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For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010 ECON 306 CLASS HANDOUT THE UTILITY FUNCTION ASSUMPTIONS ABOUT CONSUMER CHOICE NEEDED TO DERIVE THE DEMAND CURVE COMPLETENESS: For all alternatives A and B, either A > B, or B > A, or A ~ B TRANSITIVITY If A > B, and B > C, then A > C If A ~ B, and B ~ C, then A ~ C NON-SATIATION: There is always a B such that B >A
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For Personal Use Only. Not For Circulation. © Charles R. Hulten 2010 X = quantity of good X consumed Y = quantity of good Y consumed M Good X Good Y A 0 M B M Z C Good X Good Y A 8 8
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