Economics 2150A/B Lecture Notes - Lecture 3: Broccoli, Utility, Caffeine

• School: Western University
• Department: Economics
• Course: Economics 2150A/B
• Professor: Irene Trela

Document Summary

The following application will be taken up in class: If mux = y/ 2 x no matter what value of x you put in, y is constant, no matter what value of x, mux is a good, since its positive and greater than 0. This means that there is a marginal diminishing return. The value placed on a fad good becomes higher. Mux > 0 but mu fall as x increases. Muy > 0 but mu falls a y increases. Before the fad the indifference curve is downward sloping, during the fad it becomes more steeper and after it become neutral. And u curve becomes horizontal after the fad since you are no better or worse off. Change in indifference curves, the change at x that turns a downward sloping indifference curve to upward slope means they are forcing one more unit of x without you needing it, compensating trade off due to being forced.