Lectures in Microeconomics-Charles W. Upton Indifference Curves
Lectures in Microeconomics-Charles W. Upton Indifference Curves.
Dec 19, 2015
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Lectures in Microeconomics-Charles W. Upton
Indifference Curves
Indifference Curves
Utility Functions
• Individuals have utility functions U(A,B)
Indifference Curves
Utility Functions
• If U(A1,B1) > U(A2,B2)
(A1,B1) is preferred to (A2,B2)
• If U(A1,B1) = U(A2,B2)
The consumer is indifferent between(A1,B1) & (A2,B2)
Indifference Curves
Utility Functions
• (A1,B1) is preferred to (A2,B2)
– Then U(A1,B1) > U(A2,B2)
Indifference Curves
Utility Functions
• (A1,B1) is preferred to (A2,B2)
– Then U(A1,B1) > U(A2,B2)
• The consumer is indifferent between(A1,B1) & (A2,B2)
– Then U(A1,B1) = U(A2,B2)
Indifference Curves
Combinations of A & BA
B
We represent an individual’s preferences with indifference curves,
plots of points representing equal utility
Indifference Curves
Combinations of A & BA
B
Indifference Curves
Combinations of A & B
\
A
B
1
5
7
2
4
3
8
6
Indifference Curves
Combinations of A & B
\
A
B
1
5
7
2
4
3
8
6
3>1
Indifference Curves
An Indifference Curve
\
A
B
1
57
2
4
3
8
6
5=2=6
Indifference Curves
An Indifference Curve
\
A
B
1
57
2
4
3
8
6
5=2=6
I1
Indifference Curves
An Indifference Curve
\
A
B
1
5
7
2
4
38
6
I1
I2
Indifference Curves
An Indifference Curve
\
A
B
1
5
7
2
4
38
6
I1
I2
Indifference Curves
An Indifference Curve
\
A
B
1
5
7
2
4
3
8
6
I1
I2
I3
Indifference Curves
Properties of Indifference Curves
\
A
B
1
5
7
2
4
3
8
6
I1
I2
I3
Indifference Curves
There are an Infinite Number
\
A
B
1
5
7
2
4
3
8
6
I1
I2
I3
Indifference Curves
They Never Cross
\
A
B
1
5
7
2
4
3
8
6
I1
I2
I3
R >G
Indifference Curves
They Never Cross
\
A
B
1
5
7
2
4
3
8
6
I1
I2
I3
G>R
Indifference Curves
End
©2004 Charles W. Upton
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