Chap 4 - Chap 4 1) Leisure and consumption 2) Consumers...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Chap 4 1) Leisure and consumption 2) Consumer’s preferences over goods are represented in an indifference map by using a budget constraint and indifference curves. 3) 3 properties preferences of consumers have are: more is always preferred to less a consumer prefers a consumption bundle with more consumption, leisure, or both; the consumer likes diversity in his or her consumption bundle a mixture of two preferred goods would be preferable to either one; and consumption and leisure are normal goods the quantity of consumption and leisure increases when income increase thus both are normal goods 4) 2 properties indifference curves have are that they slope downward and that are convex (boxed toward to the origin). The downward sloping property is associated with the fact that more is preferred to less. If we take consumption or leisure away from the consumer we have to give him/her either leisure or consumption to have the same utility. The Convexity property follows the preference of the consumer for diversity, as the MRS diminishes along the curve.
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.
Ask a homework question - tutors are online