Lecture2_ Jan 20 - Indifference curves cant be...

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Econ 100A – Microeconomics Professor Sarah Reynolds Department of Economics University of California, Berkeley Textbook by Thomas Nechyba Tastes & Indifference Curves Chapter 4 - January 20 th , 2011 Today we establish assumptions about tastes & preferences, which allow us to map indifference curves & transition into mathematical analysis. Some bundles Economists’ curly symbols: Symbol My interpretation Book’s interpretation Rationality Complete Tastes Interpretation in terms of utility functions Transitive tastes Interpretation in terms of utility functions
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Three more assumptions required to ease into mathematical representation Monotonicity Is this realistic? Interpretation in terms of utility functions
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Convexity Is this realistic? Interpretation in terms of utility functions
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Continuity Is this realistic? Interpretation in terms of utility functions a=(6,3) b=(5,2) c=(2,6) d=(3,3) e=(4,4) f=(6,6) x 1 x 2
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Properties of Indifference Curves: There is an indifference curve _______________________________ every possible bundle.
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Unformatted text preview: Indifference curves cant be _______________________. Bundles farther from the origin are _______________________ to those closer to the origin. Indifference curves cannot ________________________. Indifference curves are ________________________ & __________________________. A complete set of someones indifference curves is an _______________________________. We can simplify this map into a _____________________________________. Definition: Vocab: ordinal vs. cardinal Utility functions are not unique! a=(5,5) b=(2,8) c=(4,4) d=(1,1) Utility function x 1+ x 2 x 1 x 2 (x 1 x 2 ) 1/2 (x 1 x 2 ) 1/2-10 10-(x 1 x 2 ) 1/2 a b c d Revisiting the properties of preferences as properties of utility functions. Why do we care about these utility functions? What do they tell us as economists? Marginal rate of substitution Definition Mathematical Derivation Example...
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This note was uploaded on 09/11/2011 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at University of California, Berkeley.

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Lecture2_ Jan 20 - Indifference curves cant be...

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