ECON 201 Lecture Notes - Lecture 6: Marginal Utility, Cardinal Utility, Demand Curve
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Chapter 6 consumer choice and demand decisions. The equilibrium condition is written as follows: = The theory: utility is a useful way of analyzing how a consumer makes choices, however, we cannot observe utility, either marginal or total. 6. 3 indifference analysis the budget constraint. The slope of the budget constraint is as follows: (cid:1871)(cid:1867)(cid:1868)(cid:1857) (cid:1867)(cid:1858) (cid:1872) (cid:1857) (cid:1854)(cid:1873)(cid:1856)(cid:1859)(cid:1857)(cid:1872) (cid:1855)(cid:1867)(cid:1866)(cid:1871)(cid:1872)(cid:1870)(cid:1853)(cid:1866)(cid:1872)= (cid:3051)(cid:3052) (cid:1845)=(cid:1835) (cid:1836) Budget constraint can also be obtained by the following. Indifference curve defines combinations of goods and services that yield the same level of satisfaction to the consumer. Indifference map is a set of indifference curves, where curves further from the origin denote a higher level of satisfaction: four properties for indifference curves. Indifference curves further from the origin reflect higher levels of satisfaction. Reflects the fact that if a consumer gets more of one good she should have less of the other in order to remain indifferent between the two combinations.