chap 4 Flashcards
1
Q
Assumptions
A
- more is always preferred to less
- consumer likes diversity in his or her consumption
- Consumption and leisure are normal goods
2
Q
when is a good normal?
A
it is normal goods when the quantity of good increase when income increase
3
Q
what is an indifferent curve ?
A
it is a set of points ,with these points representing consumption bundles among which the consumer is indifferent
4
Q
Key properties of indifferent curves
A
- slope downward
2. convex (bowed in towards the origin) - diversity assumption
5
Q
definition of Marginal rate of substitution (leisure for consumption)
A
It is the rate at which the consumer is just willing to substitute leisure for consumption goods
6
Q
competitive behavior (consumer)
A
consumer is price taker
7
Q
optimal consumption bundle
A
it is the point representing a consumption-leisure pair that is the highest possible indifference curve and is on or inside the consumer’s budget constraint
