Slide 1Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Slide 20Slide 21Slide 22Slide 23Slide 24Slide 25Slide 26Slide 27Slide 28Slide 29Slide 30Slide 31Slide 32Slide 33Slide 34Slide 35Slide 36Slide 37Slide 38Slide 39Slide 40Slide 41Slide 42Slide 43Slide 44Slide 45Slide 46Slide 47Slide 48Slide 49Slide 50Slide 51Slide 52Slide 53Slide 54Slide 55Slide 56Slide 57Slide 58Slide 59Slide 60Slide 61Slide 62Slide 63Slide 64Slide 65Slide 66Slide 67Slide 68Slide 69Slide 70Slide 71Slide 72Slide 73Slide 74Slide 75Slide 76Slide 77Slide 78Slide 79Slide 80Slide 81Slide 82Slide 83Group-Clicker Question (1 pt): Which of the following statements is true?. 1. If preferences are locally non-satiated, they must be monotonic.2. If preferences are monotonic, they must be locally non-satiated.3. Neither of the above statements is true.0%0%0%ECON 410 Indifference Curves“Many a secret that cannot be pried out by curiosity can be drawn out by indifference.” – Sydney J. Harris2Class 6 – Utility FunctionsMath Session (Tonight)Thursday 1/23 6-8pm GA210Math Session (Tonight)Thursday 1/23 6-8pm GA2103Class 5 – Indifference Curves/MapsHW2 Due Thursday, Feb. 6HW2 Due Thursday, Feb. 6HW3 Due Thursday, Feb. 13Midterm 1 on Thursday, Feb. 204Individual ChoiceIndividual ChoiceWhat you wantWhat you wantFoundationFoundationStructureStructurePatternsPatternsWhat you can haveWhat you can haveWhat you will chooseWhat you will chooseFirm ChoiceFirm ChoiceGame TheoryGame TheoryClass 5 – Indifference Curves/Maps�5Class 5 – Indifference Curves/MapsFoundationFrameModeling Human Choice6Class 5 – Indifference Curves/MapsComplete•A decision can be madeComplete•A decision can be madeSymmetric•An individual is indifferent to all options she can compareSymmetric•An individual is indifferent to all options she can compareTransitive•Preference rankings are “consistent”Transitive•Preference rankings are “consistent”Local nonsatiation•No local bliss pointsLocal nonsatiation•No local bliss pointsMonotonicity•More is betterMonotonicity•More is betterStrict Convexity•Preference for diversityStrict Convexity•Preference for diversityContinuity•No unexpected shifts in preferencesContinuity•No unexpected shifts in preferencesGroup-Clicker Question (P): In forming a generic analogy for human preferences, we should assume preferences are complete.1. Strongly Agree2. Agree3. Somewhat Agree4. Neutral5. Somewhat Disagree6. Disagree7. Strongly DisagreeComplete•A decision can be madeComplete•A decision can be madeSymmetric•An individual is indifferent to all options she can compareSymmetric•An individual is indifferent to all options she can compareTransitive•Preference rankings are “consistent”Transitive•Preference rankings are “consistent”Local nonsatiation•No local bliss pointsLocal nonsatiation•No local bliss pointsMonotonicity•More is betterMonotonicity•More is betterStrict Convexity•Preference for diversityStrict Convexity•Preference for diversityContinuity•No unexpected shifts in preferencesContinuity•No unexpected shifts in preferencesGroup-Clicker Question (P): In forming a generic analogy for human preferences, we should assume preferences are symmetric.1. Strongly Agree2. Agree3. Somewhat Agree4. Neutral5. Somewhat Disagree6. Disagree7. Strongly DisagreeComplete•A decision can be madeComplete•A decision can be madeSymmetric•An individual is indifferent to all options she can compareSymmetric•An individual is indifferent to all options she can compareTransitive•Preference rankings are “consistent”Transitive•Preference rankings are “consistent”Local nonsatiation•No local bliss pointsLocal nonsatiation•No local bliss pointsMonotonicity•More is betterMonotonicity•More is betterStrict Convexity•Preference for diversityStrict Convexity•Preference for diversityContinuity•No unexpected shifts in preferencesContinuity•No unexpected shifts in preferencesGroup-Clicker Question (P): In forming a generic analogy for human preferences, we should assume preferences are transitive.1. Strongly Agree2. Agree3. Somewhat Agree4. Neutral5. Somewhat Disagree6. Disagree7. Strongly DisagreeComplete•A decision can be madeComplete•A decision can be madeSymmetric•An individual is indifferent to all options she can compareSymmetric•An individual is indifferent to all options she can compareTransitive•Preference rankings are “consistent”Transitive•Preference rankings are “consistent”Local nonsatiation•No local bliss pointsLocal nonsatiation•No local bliss pointsMonotonicity•More is betterMonotonicity•More is betterStrict Convexity•Preference for diversityStrict Convexity•Preference for diversityContinuity•No unexpected shifts in preferencesContinuity•No unexpected shifts in preferences10Class 5 – Indifference Curves/Mapsff f11Class 5 – Indifference Curves/MapsHey monkey! Want to trade that orange for a pineapple? I’ll do it for $1.Seems reasonablef f f12Class 5 – Indifference Curves/MapsHey monkey! Want to trade that pineapple for an banana? I’ll do it for $1.You bet I would!f f f13Class 5 – Indifference Curves/MapsHey monkey! Want to trade that banana for an orange? I’ll do it for $1.That would be splendid!f f f14Class 5 – Indifference Curves/MapsAnd so on....f f f15Class 5 – Indifference Curves/MapsIntransitive preferences lead to the possibility of a “money pump”, a clear evolutionary disadvantage.16Class 5 – Indifference Curves/Maps4 5 6 7 8 9 10 11 12 13 13+0102030405060708090100% of Transitive Preferences in Color SelectionAge% of Transitive ResponsesGroup-Clicker Question (P): In forming a generic analogy for human preferences, we should assume preferences are locally nonsatiated.1. Strongly Agree2. Agree3. Somewhat Agree4. Neutral5. Somewhat Disagree6. Disagree7. Strongly DisagreeComplete•A decision can be madeComplete•A decision can be madeSymmetric•An individual is indifferent to all options she can compareSymmetric•An individual is indifferent to all options she can compareTransitive•Preference rankings are “consistent”Transitive•Preference rankings are “consistent”Local nonsatiation•No local bliss pointsLocal nonsatiation•No local bliss pointsMonotonicity•More is betterMonotonicity•More is betterStrict Convexity•Preference for