Microeconomics I partie 8/9
Fiches de révisions
Fiches de révisions
Set of flashcards Details
| Flashcards | 35 |
|---|---|
| Language | English |
| Category | Macro-Economics |
| Level | University |
| Created / Updated | 06.06.2019 / 02.10.2023 |
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Both prices double
Budget constraint: changes in prices
Suppose price of good 1 increases from p to p' (i.e. delta p > 0),
c.p.
Consumer worse off, unleast he didn't consume good 1, then indifferent
Budget constraint: change in income
Suppose income increases from m to m' (i.e. m > 0), c.p.
What affect the budget line?
Change in income
Change in prices
Slope of the budget line
Equation of the budget line
Condition for an affordable bundle
A consumer choice set
is the collection of all consumption choices available to the consumer
Two parameter of the optimizazion principle
Budget constraint
Preferences
Reservation price
maximum willingness to pay
indifferent between purchasing or not purchasing the good
Pareto efficiency in rent control
Inefficient
Pareto efficiency in monopoly
Inefficient because not all appartment are occupied
Pareto efficiency in discriminatory monopoly
Pareto efficient
Pareto efficiency in competitive equilibrium
Pareto efficient
Pareto efficiency
the only way one person’s welfare can be improved is to lower another person’s welfare
Which of the following utility functions could be used to represent David’s preference ordering?
Not the 3rd nor the 5th
Preferences axioms
I complete: any two bundles can be compared
I reflexive: any bundle is at least as good as itself X >= X
I transitive: if X >= Y and Y >= Z then X >= Z
Example for MRS
The Marginal Rate of Substitution (MRS)
Well behaved preferences
Monotonicity: more is preferred to less
Convexity: the average is preferred to extremes
Bad, neutral, satiation point, discrete
Perfect Complements
Goods that are always consumed together in fixed proportions (measured by the slope of the ray through the origin)
Only the number of pairs of units of the two commodities determines the preference rank-order of bundles
Perfect Substitutes
The consumer is willing to substitute one good for another at a constant rate (measured by the slope of the indifference
curves)
Only the total amount of the two commodities in bundles determines their preference rank-order
Indifference curves cannot cross
Assume X and Y are on different
indifference curves and for
example X > Y .
X and Z are on the same
indifference curve so X = Z.
Y and Z are on the same
indifference curve so Y = Z.
By transitivity, X = Y which
contradicts X > Y .
“structure” on preferences
I complete: any two bundles can be compared
I reflexive: any bundle is at least as good as itself X X
I transitive: if X Y and Y Z then X Z
Often also ‘well-behaved’ (monotonic, convex)
We introduce the following preference relations:
I strict preference of X over Y : X Y
I indifference between X and Y : X Y
I weak preference of X over Y : X Y
More general choice sets, choice set
Intercept of all constraints
Negative price, rationing and food stamp program
Quantity penalty graph
Quantity discount graph
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