Econ Exam 3

• income
• prices of goods
• tastes, which rank bundles according to utility
• utility maximization

• maximum affordale quantitiy of one good given the quantity of other goods purchased
• illustrated by the budget line

• illustrates bundles that are available given the budget constraint
• choices made will determine demand for each category

consumer can rank alternative bundles according to the utility they provide

consumers are consistent

consumers prefer more utility to less

as a consumer consumes more units, they gain less utility

• a way of representing tastes
• all points on the same curve yield the same utility
• cannot cross eachother
• slope downward

terminate tansitivity

tanget to indefference curve

the point on an indifference curve that is tangent to the budget constraint line

• maximize utility
• behave rationally

• completeness
• transitivity
• monotonicity

• how one should
• utility theory

how one could

what one actually does