ECO100Y5 Chapter Notes - Chapter 6: Car Rental, Indifference Curve, Opportunity Cost
53
ECO100Y5 Full Course Notes
Verified Note
53 documents
Document Summary
The slope of an indifference curve is the marginal rate of substitution. (fig. The slope of a budget line is the opportunity cost. Budget lines shift and rotate in response to changes in prices and income. (fig. When choosing among alternative plans a maximizing consumer opts for the one that yields the highest utility. Per-unit policies affect the slope of the budget line while lump-sum taxes and subsidies are like income changes. Consumers who can substitute can always bene t from revenue equivalent price changes. A friend is moving out of residence after exams and she needs a big van to move all her stuffed teddy bears. The car rental agency offers her two plans. With plan a she pays a at rate of and pays sh. 20 per kilometer. With plan c the at rate is but she only pays sh. 10 per kilometer.
