Ch 2 consumer theory basics

Eco 204 s ajaz hussain do not distribute example 1 in

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

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ver consumption sets of one, two, and three goods (of course, one can write down utility models for more than three goods) – don’t worry if you don’t understand these yet: Examples of Utility Functions for { good defined over } ● Examples of Utility Functions for ( ● Examples of Utility Functions for ) and } ) ( ) {( goods defined over ( ● Below are graphs of some {( goods defined over ) } ) utility functions – don’t worry if you don’t understand these yet: 12 ECO 204 CHAPTER 2 Modeling Consumer Choice and Behavior: Preferences and Budget Constraints (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. Example 1: In Wolfram Alpha type plot u=exp(3q) from q=0,3 Example 2: In Wolfram Alpha type plot u=3q + log(q) from q=0,10 ( Example 3: ) In Wolfram Alpha type plot u=3log(q1) + 2log(q2) from q1=0,10 q2=0,10 Example 4: ( ) ( )( ) 13 ECO 204 CHAPTER 2 Modeling Consumer Choice and Behavior: Preferences and Budget Constraints (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. In Wolfram Alpha type plot u=(q1-3)^2 + (q2-4)^2 from q1=0,10 q2=0,10 From a consumer’s utility function we can easily tell whether the consumer perceives a particular commodity as “good”, “bad”, or “neutral” good. Intuitively: “Good” good If and then consumer perceives this good as a “good” good “Bad” good If and then consumer perceives this good as a “bad” good “Neutral” good If and does not change then consumer perceives this good as a “neutral” good ● Example: Utility function defined over { } ● Example: Utility function defined over { } { ● Example: Utility function defined over { } 14 ECO 204 CHAPTER 2 Modeling Consumer Choice and Behavior: Preferences and Budget Constraints (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. This means: ● Example: { } { Utility functi...
View Full Document

This note was uploaded on 03/20/2014 for the course ECON 204 taught by Professor Ajazhussain during the Fall '09 term at University of Toronto- Toronto.

Ask a homework question - tutors are online