100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Understanding the Information Economy Indifference Curves and Budget Line Lecture Notes £5.49
Add to cart

Lecture notes

Understanding the Information Economy Indifference Curves and Budget Line Lecture Notes

 0 purchase

You will find the essential information from Understanding the Information Economy's Week 1 lecture content as well as practice question and answers. It provides detailed notes and information regarding the topic of indifference curves and budget lines.

Preview 2 out of 10  pages

  • June 2, 2021
  • 10
  • 2020/2021
  • Lecture notes
  • Peter antoni
  • 1
All documents for this subject (3)
avatar-seller
meganwells
MSIN0181: Understanding the Information Economy
Topic 1: Indifference Curves and Budget Lines

Budget Lines
Budget Equation: Price (x1) * Quantity (x1) + Price (x1) * Quantity (x1)
P1x1 + P2x2 = M
• Optimal consumption of products will be on the budget line
• Prices fall: budget line get shallower
• Prices rise: budget line gets steeper




Budget line of product B (bourbon creams) versus product J (Jaffa cakes)




If the price of J has fallen - the budget line changes to:

, The price of product B has not changed, however, as the price of product J has decreased,
consumers can purchase more of product J for cheaper.

When the price of only one good changes, the budget line twists. So if you are allocating all your
budget to the good whose price hasn't changed, you'll notice nothing/
• The ratio of the two price: P(B) over P(J) is key



Utility and Optimisation
Key Assumption: consumers wish to get as much utility as they can. They are consistent in their
preferences and experience diminishing marginal utility as the consumption of a good goes up
(utility is depicted using indifference curves)
• It should be the case that adding successive amounts to your consumption yields
successively less and less utility.

Indifference Curves
• An indifference curve is a depiction of all the bundles that one could consume that
give us the same level of utility
o This is how we depict utility
• All points on the curve will yield the same amount of utility.
• The optimal point must be tangent to the budget line.
• Higher utility is experienced the further away the curve is from the axis

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller meganwells. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for £5.49. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

65863 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy revision notes and other study material for 15 years now

Start selling
£5.49
  • (0)
Add to cart
Added