ECON 438 Lecture Notes - Lecture 5: Convex Set, Indifference Curve

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24 Jul 2020

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Tastes of a cocaine addict: fred is addicted to cocaine. Suppose we want to model his tastes over cocaine and other goods. Then indicate all the bundles that are strictly preferred to a. Panel (a) of graph 4. 7 illustrates the set of bundles that are strictly preferred to a. These are represented by the solid line above a. Graph 4. 7: on a separate graph, indicate all bundles that are strictly less preferred than a. Panel (b) of graph 4. 7 illustrates the set of bundles that are strictly less preferred than a. This set includes all bundles that contain less cocaine than a i. e. all bundles to the left of a. It also includes all bundles that have the same amount x a1 of cocaine as bundle. Panels (a) and (b) graphed two sets the set of bundles strictly preferred to a (panel (a)) and the set of bundles that a is strictly preferred to (panel (b)).

Related Questions

1. In each of the following situations, the possible bundles contain apples and oranges and either 0,

1 or 2 of each. An example bundle would be 2 apples and 1 orange = (2, 1). In each part, there is a

description of a set of preferences. If an ordering can be made, make the ordering of the 9 possible

bundles, and list any bundles that would be on the same indifference %u201Ccurve%u201D. If the ordering cannot

be made, give an example of which bundles cannot be ranked and explain which assumption on

preferences is being violated (3 points)

a) Non-satiated in both goods. Apples always better than oranges.

b) In bundles with zero of either oranges or apples, the bundle with more oranges is better. If the

bundle has 0 oranges, the bundle with more apples is better. In bundles with at least 1 apple,

the best bundle is the one that has the biggest total of apples and oranges. In bundles with

at least 1 orange, the better bundle is the one that generates the biggest number when the

number of apples is divided by the number of oranges.

c) Non-satiation applies to all relevant bundles (So (1, 2) pref (1,0)). For the others%u2026

(1, 0) pref (0,1) (1, 1) pref (0,2) (2, 0) pref (1,1)

(2, 0) pref (0,1) (0, 2) pref (2,0) (1, 2) pref (2,0)

(0, 2) pref (1,0) (2, 1) pref (0,2) (1, 2) pref (2,1)

budget line

marginal utility

complete property of preferences

market demand

consumption bundle

substitution effect

Giffen good

total effect

income effect

transitive property of preferences

indifference curves

utility

the marginal rate of substitution

utility function

1.	_____	The satisfaction or benefit that consumers receive from consuming goods or services.
2.	________________ _	A particular combination of specific quantities of goods or services
3.	________________ _	Consumers can rank all conceivable bundles of goods or services
4.	_____	If A is preferred to B, and B is preferred to C, then A is always preferred to C.
5.	_____	Equation showing a consumerâs perception of the total utility forthcoming from consuming each bundle of goods and services.
6.	_____	A set of consumption bundles each and every one of which provides a consumer with exactly the same level of total utility.
7.	_____	The number of units of Y that must be given up for total utility to remain the same when one more unit of X is consumed.
8.	_____	The addition to total utility attributable to consuming one more unit of a good, holding the consumption of all other goods constant.
9.	_____	The line showing all bundles of goods that can be purchased at given prices if the entire income is spent.
10.	_____	The change in the consumption of a good that would result if the consumer remained on the original indifference curve after the price of the good changes.
11.	_____	The change in consumption of goods results strictly from the change in purchasing power after the price of a good changes.
12.	________________ _	The sum of the substitution and income effects.
13.	_____	A good for which quantity demanded varies directly with price, causing an upward sloping demand curve.
14.	_____	A list of prices and the corresponding quantity consumers are willing and able to purchase at each price.

blushwildebeest943

Bob consumes only apples and bananas. He always prefers more apples to fewer, but he gets tired of bananas. If he consumes fewer than 29 bananas per week, he thinks that 1 banana is a perfect substitute for 1 apple. But you would have to pay him 1 apple for each banana beyond 29 that he consumes. His indifference curve that contains the consumption bundle with 30 apples and 39 bananas also contains the bundle with 21 bananas and how many apples?

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ECON 438 Lecture Notes - Lecture 5: Convex Set, Indifference Curve

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