Econ 2023 1st Edition Lecture 11 Outline of Last Lecture I. Consumers Choicea. Demand: its equation and how to solve. II. UtilityIII. Effect of Price Change. IV. Backwards bending labor supply curveOutline of Current Lecture II. Indifferent curve.III. Arbitraush: a. Calculations.Current LectureI. Indifference curves: the curve that contains combinations of goods that you are indifferent to (don’t really care for). a. What is available to you in the combinations you have is a choice set which is then an opportunity cost. Utility comes from your preferences. b. On an X and Y graph= the northwest quadrant and the southeast quadrant is neutral grounds, cannot tell if utility is reached or not. In the Southwest quadrantyou are receiving less utility and more utility in the Northeast quadrant. c. Utility is not something that you can measure, it has to do with preferences. II. Arbitrash: finding a difference in pricing.a. For the consumer to maximize utility is to find the point between the budget constraint and the indifference curve. Where they both intersect.b. P^y/P^x (market trade off) =MU^y/MU^x (internal or personal trade off) i. If you divide by P^y which cancels out becoming 1/P^x=MU^y/MU^x P^yii. Now multiply by MU^x and that cancels out becoming MU^x/P^x=MU^y/P^y.1. These two conditions are equally values as sources of utility. (all money is spent).These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a
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