Suppose that you have two consumption choices: good X, and good Y. An indifference curve is the set of consumption choices with a CONSTANT utility. For example if consuming 10X and 6Y gives me the same utility as consuming 11X and 5Y, then these are both points on the same indifference curve. An indifference map is the set of all indifference curves with EVERY given utility. Consider the indifference map given by: U = XY, where U is a measure of utility. A budget curve gives the set of possible consumption choices with a given income. If you have an income of $1440 and the price of good X is given by px, and the price of good Y given by py. The equation for the budget line is given by: 1440 = p.X +p, Y. A utility maximizing combination of goods X and Y occurs when the budget line is tangent to a indifference curve. Find X as a function of its price. (If Y represents all other goods, than this function is just a demand curve for X). X = Use px for px) Let X and Uo be the values for X and U when px = 12 and py = 8.
Suppose that you have two consumption choices: good X, and good Y. An indifference curve is the set of consumption choices with a CONSTANT utility. For example if consuming 10X and 6Y gives me the same utility as consuming 11X and 5Y, then these are both points on the same indifference curve. An indifference map is the set of all indifference curves with EVERY given utility. Consider the indifference map given by: U = XY, where U is a measure of utility. A budget curve gives the set of possible consumption choices with a given income. If you have an income of $1440 and the price of good X is given by px, and the price of good Y given by py. The equation for the budget line is given by: 1440 = p.X +p, Y. A utility maximizing combination of goods X and Y occurs when the budget line is tangent to a indifference curve. Find X as a function of its price. (If Y represents all other goods, than this function is just a demand curve for X). X = Use px for px) Let X and Uo be the values for X and U when px = 12 and py = 8.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 3SQP
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Transcribed Image Text:Suppose that you have two consumption choices: good X, and good Y. An indifference curve is the set of consumption choices
with a CONSTANT utility. For example if consuming 10X and 6Y gives me the same utility as consuming 11X and 5Y, then these are both
points on the same indifference curve. An indifference map is the set of all indifference curves with EVERY given utility.
Consider the indifference map given by:
U = XY, where U is a measure of utility.
A budget curve gives the set of possible consumption choices with a given income. If you have an income of $1440 and the price of
good X is given by px, and the price of good Y given by py. The equation for the budget line is given by: 1440 = PxX + pyY.
A utility maximizing combination of goods X and Y occurs when the budget line is tangent to a indifference curve.
Find X as a function of its price. (If Y represents all other goods, than this function is just a demand curve for X).
X =
(Use px for px)
Let Xo and Uo be the values for X and U when px = 12 and py = 8.
Xo =
Uo
=
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