ECO209Y5 Chapter Notes - Chapter 4: Profit Maximization, Royal Society Of Literature, Indifference Curve

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17 Oct 2018
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Given there"s only one time period, consumers & firms will make static, not dynamic, decisions. Dynamic decision making involves planning over more than one period, as, for example, when individuals make decisions concerning how much to spend now & how much to save for the future. The consumer chooses between 2 choices: whether to consume the consumption good (c) or leisure. The function outputs the level of utility that a consumer receives for each bundle. Note: the actual level of utility is irrelevant; all that matters for the consumer is what the level of utility is from a given consumption bundle relative to another one. In contrast, a good is inferior for a consumer if he or she purchases less of that good when income increases. An indifference curve connects a set of points, with these points representing consumption bundles among which the consumer is indifferent.

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