PPT-Indifference Curve Approach

Topic 3 Outline Conceptsdefinitionillustration Indifference map Slope of indifference CurveMRTS DMRTSreasons Assumptions of Indifference curve Properties of Indifference Curve Budget line. Indifference curves . Chapter 3. Budget line. 2. Points on the budget line indicate all the bundles of goods that the consumer can afford.. Good 2. 150. 50. 100. Good 1. 150. 100. 0. 50. Indifference Curve. Curve . Analysis. ASSUMPTION OF INDIFFERENCE CURVE. ANALYSIS.. 1. A consumer is assumed to buy any two goods in combinations.. 2. A consumer can rank the alternative combinations and compare their level of satisfaction, and he prefers a combination providing a higher level of satisfaction.. www.lancaster.ac.uk/postgrad/murphys4/. s.murphy5@lancaster.ac.uk. office: LUMS . C85. Outline for this week’s tutorial. Past exam question ( from last week) – 5 min.. Question 1 – 2 min.. Question 2 – 3 min. . Lecture# 5. Consumer behavior. O. rdinal Approach/ Indifference Curve Analysis. Indifference Curves. Indifference analysis . is an alternative way of explaining consumer choice that does not require an explicit discussion of utility.. Utility and Choice. . Objective. Build a model to understand how a consumer makes decisions under scarcity.. To understand his choice we need to know:. Preferences. Constraints. Consumer makes a choice that results in the maximum satisfaction or UTILITY.. 14. February 26. th. , 2014. Lecture . 16. Ch. . 9. . Ordinal Utility:. Indifference Curve Analysis. Indifference . Curves. An . indifference curve. . represents all the combinations of the two goods amongst which. www.lancaster.ac.uk/postgrad/murphys4 /. s.murphy5@lancaster.ac.uk. office. : LUMS . C85. Question 1(a). Explain, in detail, what is meant by a . Edgeworth. box in the context of a 2 good (1,2), 2 person (A,B) model of consumption. . 3.1 Consumer Preferences. 3.2 Budget Constraints. 3.3 Consumer Choice. 3.4 Revealed Preference. 3.5 Marginal Utility and Consumer Choice. 3.6 Cost-of-Living Indexes. Consumer Behavior. ●. . theory of consumer behavior . Warm-up Question. What do dating and marriage have to do with economics? . Scarcity. Choice. Utility maximization . Economics and Marriage. A market is any mechanism or institution that brings buyers together with sellers. What is “Indifference”? . indifferent: . 1 having or showing no partiality, bias, or preference; neutral 2 having or showing no interest, concern or feeling; uninterested, apathetic, or unmoved. .. Consumer Choice. Postulate: . an unproved and indemonstrable statement that should be taken for granted: used as an initial premise or underlying hypothesis in a process of . reasoning. Consumer choice postulate: People choose from available options to maximize their well-being (utility).. Indifference:. Having a neutral or unbiased disposition.. Not interested in or concerned about something.. Apathetic; not easily interested or moved.. Characterized by lack of active quality.. ~ Webster. Objectives: . Upon completion of this unit students should be able to;. Define the concept of utility as basis of demand.. Define Marginal utility and diminishing marginal utility.. Draw indifference curve and individual demand curve.. Introduction. Supply and Demand Models (Ch. 2) are useful for analyzing economic questions concerning markets.. How will increasing the real wage affect output?. In these models we summed each individuals demand to obtain the market demand curve..