Intermed Micro Theory
Intermed Micro Theory ECN 100
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This 1 page Class Notes was uploaded by Madie Schinner on Tuesday September 8, 2015. The Class Notes belongs to ECN 100 at University of California - Davis taught by Staff in Fall. Since its upload, it has received 38 views. For similar materials see /class/191887/ecn-100-university-of-california-davis in Economcs at University of California - Davis.
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Date Created: 09/08/15
Ecn 100 Handout amp Problem Set 3 of people s tastes utility function u X v and indifference curve Key concept that these both are used to describe MRS Marginal Rate of Substitution PR pp 9091 Max y would give up to get one unit of X Min y requires to give up one unit of X MU 3 where y is on vertical aXis and X on horizontal aXis and MUX ag Convenient eXamples of preferences perfect substitutes straightline indifference curves uXy aX by a b gt 0 ngy1 3X 1 MRS au X b 5y perfect complements rightangle indifference curves uXy minaXy bXy a b gt 0 MRS not defined at key point the comer CobbDouglas PR p 143 l4l rectangular hyperbolas uXy Xayb a b gt 0 MRS a y bX guasilinear uxy vi y Increasing MRS uXy X2 y2 Questions to answer ONLY for guasilinear preferences 1 Calculate MRS for guasilinear preferences 2 Do these indifference curves get steeper or atter or have constant slope as X increases but y stays constant EXplain how you decide this 3 Given the movement described in 2 in the graph of X and y does X become more or less valuable in terms of y or does its value not change as you move to the right 4 Do these indifference curves get steeper or atter or have constant slope as y increases but X stays constant EXplain how you decide