Trade with Demand and Supply

Trade with Demand and Supply - indifferent among. This is...

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Trade with Demand and Supply Consider a consumer with a given money income, all of which she spends on only two goods: pizza and beer. The combinations of pizza and beer are called bundles. e.g. X = (2 slices of pizza, 3 bottles of beer) Y = (3 slices of pizza, 1 bottle of beer) Assume that the consumer can tell us whether 1. X is preferred to Y 2. Y is preferred to X 3. she is indifferent between X and Y Suppose she is indifferent between X and Y. Connecting the points gives an indifference curve. An indifference curve shows all combinations of pizza and beer that the consumer is
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Unformatted text preview: indifferent among. This is an indifference map: There is an infinite number of indifference curves. Consumers want to be on the highest possible indifference curve. Community indifference curves purport to show the preferences of the entire nation. Of all the points at which the country can produce, point E gives the highest utility. The line drawn through point E gives the equilibrium price ratio which brings producers and consumers into equilibrium . The country produces at point A and consumes at point B. So, they end up on a higher indifference curve....
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This note was uploaded on 11/22/2011 for the course FIN FIN1100 taught by Professor Bradrifkin during the Fall '09 term at Broward College.

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Trade with Demand and Supply - indifferent among. This is...

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