ECON 1000 Lecture Notes - Lecture 9: Relative Price, Divisor, Indifference Curve

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Sam Lanfranco

Document Summary

Consumption possibilities: household consumption choices are constrained by its income and the prices of the goods and services available, budget line, limits to the household"s consumption choices. Some goods are indivisible must be bought in whole units (i. e. movies) Divisible goods can be bought in any quantity (i. e. gas: can afford any point on or below the budget line. Cannot afford any point outside the line: the budget equation, expenditure = income o o y=p1 q1+p 2q2. = real income (in terms of product 1) Indifference curve line that shows combinations of goods among which a consumer is indifferent: three groups: Steep indifference curve high mrs (willing to give up a lot of y to get a bit more of x) Flat indifferent curve low mrs (willing to give up little y to get: degree of substitutability more x) October 29th, 2013: the shape of the indifference curve reveals the degree of substitutability between two goods.