Taken 10 8 6 perfect substitutes 4 2 0 2 4 6 8 10 10

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Unformatted text preview: s Degree of Substitutability Goods are perfect complements Goods when consumption benefits depend on consuming both goods in fixed proportions. goods 5 4 3 Perfect complements 2 1 0 1 2 3 4 5 Right running shoes Predicting Consumer Behaviour Behaviour Individuals maximize their utility when: They are on their budget line. They are on their highest attainable indifference curve. Their marginal rate of substitution between the two goods is equal to the relative price. Pop (six-packs per month) The Best Affordable Point 10 Best affordable point 8f c 6 4 Budget Line i I2 2 0 h 2 4 I0 6 8 I1 1 10 Movies...
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This document was uploaded on 03/14/2014.

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