Intermediate Microeconomics · free preview

The Shape Zoo: Substitutes to Bliss Points

Perfect substitutes give constant MRS and straight lines, perfect complements give kinks where MRS is undefined, and bads, neutrals, satiation and discrete goods complete the zoo, each with its own arithmetic and its own lesson for choice.

1. Substitutes with a fixed rate

Substitutes with a fixed rate

2. Complements at fixed proportions

Complements at fixed proportions

3. Bads, neutrals and satiation

Bads, neutrals and satiation

4. Discrete goods and the practice of approximation

Discrete goods and the practice of approximation

5. Constant trade rate

For u=2x1+3x2u = 2 x_1 + 3 x_2, what is the MRS at the bundle (10,10)(10, 10), and what does it say?

6. The kink's arithmetic

For u=min⁡(2x1,x2)u = \min(2 x_1, x_2), where do the indifference curves have their kinks, and what utility does the bundle (3,6)(3, 6) deliver?

7. Reading upward-sloping curves

An indifference map has upward-sloping curves through the origin region. What does the slope tell you?

8. Past the bliss point

For u=16−(x1−4)2−(x2−4)2u = 16 - (x_1 - 4)^2 - (x_2 - 4)^2, what happens to the MRS at bundles with x1>4x_1 > 4 and x2<4x_2 < 4?

9. Utility at the bliss point

For u=16−(x1−4)2−(x2−4)2u = 16 - (x_1 - 4)^2 - (x_2 - 4)^2, compute the utility at the bundle (4,4)(4, 4), and write the number.

10. Substitutes at a bundle

For u=2x1+3x2u = 2 x_1 + 3 x_2, compute the utility at the bundle (5,4)(5, 4), and write the number.

11. Indifference for linear utility

For u of 2 x1 plus 3 x2, the bundle (5, 4) scores 22. Which bundle is NOT indifferent to it?

12. The tie that buys anything

With u of 2 x1 plus 3 x2 and prices 2 and 3, what does the consumer buy?

13. The slack arm of complements

For u of min of 2 x1 and x2, what utility does the bundle (5, 8) deliver?

14. Beyond bliss

For u of 16 minus (x1 minus 4) squared minus (x2 minus 4) squared, what happens at the bundle (6, 6)?

15. Bliss one degree off

For the bliss utility, compute u at the bundle (2, 4), and write the number.

16. Linear utility at the axis

For u of 2 x1 plus 3 x2, compute the utility at the bundle (0, 7), and write the number.

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