Indifference Curve Info Flashcards
1
Q
Indifference Curve
A
A line showing the combination of 2 goods that give the consumer the same utility
2
Q
Slope of the Indifference Curve
=
A
Marginal Rate of Substitution
3
Q
Marginal Rate of Substitution
A
Rate at which a consumer is willing to substitute one good for another but remain equally satisfied
4
Q
MRS formula
A
MUy divided by MUx
5
Q
Assumptions of IC Analysis
A
- 2 goods prices and income are known
- Aims to maximise utility
- Consumer makes rational decisions
- Information is perfect
6
Q
Consumer Equilibrium (Utility Maximisation)
A
Occurs where MU per dollar spent is the same across all goods
