Properties of Indierence Curves
The utility function U (x; y ) is a three-dimensional entity. In order to obtain a more
tractable diagrammatic analysis, economists typically employ a two-dimensional indierence curve.
Let U (x; y ) denote the utility funct

Utility Maximization
max U (x; y )
x;y
subject to
px x + py y = I:
The optimal solution is denoted by x and y :
Optimality condition for an interior solution (i.e., x > 0 and y > 0):
Marginal Rate of Substitution =
px
Marginal Utility of x
=:
Marginal Uti

ECON 2913
Honors Microeconomics
Prof. S. F. Leung
Spring 2012
Consumer Behavior
We study consumer behavior using utility analysis.
Skepticisms
A typical HKALE question on utility analysis:
"Whatever an individual does, he is maximizing utility." Which of

Lecture: l Math 006 Name:
Duratiou: 30 minutes Quiz 1 ID Number:
WARNING: Cheating is a serious violation of academic integrity. Anyone found cheating on a quiz
or exam will be automatically given a zero for the quiz or exam and additional sanctions ma