consumer choice Flashcards
if bundle a>b and bundle b>c what can we assume and what is the name of this law
bundle a>c
law of transitivity
what does a~d mean
a is indifferent to d
if bundles a,e,c are indifferent what does this mean in terms of indifference curves
they are on the same indifference curve
if a>b what does this mean for the indifference curve
the indifference curve of b is closer to the origin
what is one reason a>b
a gives a higher utility than b
can indifference curves cross
no
define MRS
the willingness to trade one good for another
how do you find the mrs curve
the gradient of the indifference curve at one point (dy/dx |x=n)
give an example of how MRS works
if a person had 30 burritos but only 5 pizzas, they may be willing to trade 3 burritos for one pizza however only 1/3 of a pizza for a burrito at this specific point on the indifference curve
what do perfect substitute indifference curve look like
linear
what do complimentary indifference curves look like
right angles
how do you find marginal utility
DU/DXDY (partial differentiation)
what does MU show
how utility rises as good x is consumed at a higher level while the consumption of good Y remains constant (vice versa)
what relation does MRS have to marginal utilities of x and y
MRS = -MUx/MUy
what is the budget constraint function
Y = PxX + PyY
