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Economics Lecture Four (view source)
Revision as of 19:32, September 21, 2009
, 19:32, September 21, 2009trying without images
The graph below is for a typical set of three indifference curves (I<sub>1</sub>, I<sub>2</sub> and I<sub>3</sub>) for someone for two goods X and Y. Note that this graph does not compare Price and Quantity, but compares the Quantity of good X (on the x-axis) with the Quantity of good Y (on the y-axis). As one goes down a specific curve, the person is "indifferent" with giving up Quantity of good Y in exchange for more of good X. The person becomes more satisfied or happier when he shifts to an entirely new curve, as in moving from I<sub>1</sub> to I<sub>2</sub>.
The graph below is for a typical set of three indifference curves (I<sub>1</sub>, I<sub>2</sub> and I<sub>3</sub>) for someone for two goods X and Y. Note that this graph does not compare Price and Quantity, but compares the Quantity of good X (on the x-axis) with the Quantity of good Y (on the y-axis). As one goes down a specific curve, the person is "indifferent" with giving up Quantity of good Y in exchange for more of good X. The person becomes more satisfied or happier when he shifts to an entirely new curve, as in moving from I<sub>1</sub> to I<sub>2</sub>.
The next graph below is for two goods X and Y that '''''are perfect substitutes for each other''''' (like our example above of a chocolate bar and a peanut butter candy bar). In the case of perfect substitutes, the person is happy to substitute one good for the other on a one-for-one basis, and hence the slope of the curves is a perfect negative one.
The next graph below is for two goods X and Y that '''''are perfect substitutes for each other''''' (like our example above of a chocolate bar and a peanut butter candy bar). In the case of perfect substitutes, the person is happy to substitute one good for the other on a one-for-one basis, and hence the slope of the curves is a perfect negative one.
==Consumer Surplus==
==Consumer Surplus==
13. Explain whether goods X or Y are perfect substitutes or complements or something else for the indifference curves below, and why:
13. Explain whether goods X or Y are perfect substitutes or complements or something else for the indifference curves below, and why:
== References ==
== References ==