lecture 4 Flashcards
what are our main limitations (constraints)?
Hours spent in each activity and how we convert study hours into grades
what is feasible consumption set?
shows all the feasible (possible) combinatios of the 2 goods (grade and free time)
what is a feasible frontier?
it is the maximum feasible quantity of one good for a given quantity of the other. slope postive.
where is impossible to atain in the set?
doesn’t belong to the set
what does it mean to be feasible and inefficient? and effcient?
inefficient → points below the feasible frontier
efficient → points in the feasible frontier
what is a trade-off?
when we must decrease our consumption of one good to increase our consumption of the other
What is the MRT?
marginal rate of transformation. it is the slope of the production function (feasible consumption frontier) and shows by how much good y will change if good x increases. what you are bounded to do
derivative of the function
what is the indifference curve?
same level of utility of the other point of the graphic with the same x. any point in the same indifference curve give us the same satisfaction.
what are the assumptions of indifference curve?
we can order outcomes,
that order is transitive (consistece),
we like having more of both goods,
are smooth (small changes in the amount of goods don’t cause big jumps in satisfaction),
as we move to the right in a difference curve, it becomes flatter
what are the properties of indifference curve?
↑ indifference curves means ↑ utility levels,
indifference curves do not cross
slope downward
What is the MRS?
marginal rate of substitution. it is the slope of the utility function (indiference curve) and is the trade-off that we are willing to make between 2 goods. what you are willing to do
(MUx:MUy)= partial derivative with respect to x : partial derivative with respect to y
What are the types of utilities that exists?
total utility → total satisfaction one gets from consuming some amount of a good
marginal utility → extra utility derived from consuming one more unit of a good, holding the consumption of the other good constant.
