Menu_05_Oct_10 - points of utility a Definition b...

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TODAY’S MENU: Tuesday 05 October 2010 I. BUSINESS A. Practice Problems 1. Chapter 10: 1, 2, 4-8, 14 2. Chapter 10 Appendix: ALL B. Second Exam: One week from Thursday (14 October) II. SUBSTANCE A. Consumption decisions, economist style 1. Example 2. Effects of budget change 3. Another example 4. Effects of price change a. Substitution effect: willingness to purchase b. Income effect: ability to purchase 5. Even more examples 6. Tool: Indifference curves – line where each point represents different
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Unformatted text preview: points of utility a. Definition b. Properties c. Slope: Marginal rate of substitution 7. Tool: Budget line a. Slope: Relative price of good 1 8. Consumer choice: maximizing behavior a. Ordinary goods i. Tangency condition b. Other goods i. Perfect substitutes ii. Perfect complements c. Budget change d. Price change i. Substitution effect ii. Income effect III. NEXT TIME A. Begin Chapter 11: “Game Theory…”...
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