ECON 313 Lecture Notes - Lecture 2: Game Theory, Concave Function, Utility
Document Summary
Budget set: all bundles which cost no more than available income. Suppose a bundle consists of quantities of goods 1 and 2, denoted by. , prices of the two goods are p p , and the. 2 consumer has available income of m. then the budget set considers of all bundles with i . Budget constraint: all bundles that just exhaust available income. The budget constraint is the subset of the budget set such that p x. Indifference curve (ic): a set of bundles between which a consumer is just indifferent. All bundles on a given indifference curve are just as good as, and no better than, all other bundles on that curve, for that individual. Defining the mrs in terms of a slope suggests that we have a diagram in mind, and an understanding of which variable is on which axis.