lectures in microeconomics-charles w. upton examples of indifference curves
TRANSCRIPT
Lectures in Microeconomics-Charles W. Upton
Examples of Indifference Curves
Examples of Indifference Curves
Three Examples
• We are going to do some special cases to illustrate how some special indifference curves look.
Examples of Indifference Curves
Coke® or Pepsi®
• I don’t care whether you have Coke® or Pepsi®, as long as it is cola.
Examples of Indifference Curves
Coke® or Pepsi®
• I don’t care whether you have Coke® or Pepsi®, as long as it is cola.
• This is a case we discussed earlier: perfect substitutes.
Examples of Indifference Curves
Coke and Pepsi
\
Coke
Pepsi
1
5
7
2
4
3
8
6
Examples of Indifference Curves
Coke and Pepsi
\
Coke
Pepsi
1
5
7
2
4
3
8
6
Examples of Indifference Curves
Coke and Pepsi
\
Coke
Pepsi
1
5
7
2
4
3
8
6
I1
Examples of Indifference Curves
Coke and Pepsi
\
Coke
Pepsi
1
5
7
2
4
3
8
6
I1
I2
Examples of Indifference Curves
Coke and Pepsi
\
Coke
Pepsi
1
5
7
2
4
3
8
6
I1
I2
I3
Examples of Indifference Curves
Left and Right Shoes
• Perfect Complements
Examples of Indifference Curves
Left and Right Shoes
\
Right Shoes
Left Shoes
1
5
7
2
4
3
8
6
Examples of Indifference Curves
Left and Right Shoes
\
Right Shoes
Left Shoes
1
5
7
2
4
3
8
6 I1
Examples of Indifference Curves
Left and Right Shoes
\
Right Shoes
Left Shoes
1
5
7
2
4
3
8
6 I1
I2
Examples of Indifference Curves
Left and Right Shoes
\
Right Shoes
Left Shoes
1
5
7
2
4
3
8
6 I1
I2
I3
Examples of Indifference Curves
Third Example
• Indifference curves between Bourbon and Temperance Lectures for W.C. Fields and Carrie Nation.
Examples of Indifference Curves
Third Example
• Indifference curves between Bourbon and Temperance Lectures for W.C. Fields and Carrie Nation.– W. C. Fields was a movie actor with a
legendary drinking problem.
Examples of Indifference Curves
Third Example
• Indifference curves between Bourbon and Temperance Lectures for W.C. Fields and Carrie Nation.– W. C. Fields was a movie actor with a
legendary drinking problem.– Carrie Nation was a prominent leader in the
temperance movement.
Examples of Indifference Curves
W. C. Fields
\
Bourbon
Temperance Lectures
1
5
7
2
4
3
8
6 I1
I2
I3
I4
Examples of Indifference Curves
Carrie Nation
\
Bourbon
Temperance Lectures1
57
2
4
38
6
I1 I2 I3 I4
Examples of Indifference Curves
Apples and Bananas
• I like apples and bananas. If you cut the number of apples in half and double the number of bananas, I am just as well off.
Examples of Indifference Curves
Apples and Bananas
• I like apples and bananas. If you cut the number of apples in half and double the number of bananas, I am just as well off.
• This is a more standard case.
Examples of Indifference Curves
Apples and Bananas
• I like apples and bananas. If you cut the number of apples in half and double the number of bananas, I am just as well off.
• This is a more standard case.
• It actually corresponds to U(A, B) = AB
Examples of Indifference Curves
Apples and Bananas
• I like apples and bananas. If you cut the number of apples in half and double the number of bananas, I am just as well off.
• This is a more standard case.
• It actually corresponds to U(A, B) = AB
• To see this, note that
(0.5A)(2B) = AB.
Examples of Indifference Curves
Apples and Bananas
\
A
B1
57
2
4
38
6I1
Examples of Indifference Curves
Apples and Bananas
\
A
B1
57
2
4
38
6I2
I1
Examples of Indifference Curves
Apples and Bananas
\
A
B1
57
2
4
38
6I2
I1
I3
Examples of Indifference Curves
More to Come
• Done– The Basic Model of Utility Maximization– Some Applications to Indifference Curve
• We continue this topic in the next lecture.
Examples of Indifference Curves
End
©2004 Charles W. Upton