ECON 102 Chapter Notes - Chapter 4: Indifference Curve, Market Power, Normal Good
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2 goods that consumers desire: consumption good = physical good, aggregate of all consumer goods in economy, aggregate consumption, leisure = time spent not working in the market. Assuming all customers are identical/ only consider one customer - single representative customer. Utility function, u(c, l) = determines how representative consumer makes choices, capture preferences of consumer over leisure and consumption goods. Consumption bundle = combination of consumption and leisure (eg. c 1 , l 1 ) Can strictly prefer one bundle to another () or is indifferent (=) What matters is level of utility of one consumption bundle relative to another one. Assume representative consumer"s pref has 3 properties: more preferred to less, consumer likes diversity in consumption bundle, consumption and leisure are normal goods. More preferred to less = prefer consumption bundle with more consumption/ leisure/ both, but we can get too much of a good thing.
