kb:utility

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kb:utility [2022-01-06 19:14] – jaeyoungkb:utility [2024-04-30 04:03] (current) – external edit 127.0.0.1
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 Diminishing marginal utility implies that indifference curves are non-concave relative to the origin. Diminishing marginal utility implies that indifference curves are non-concave relative to the origin.
  
-====== Budget constraints ======+===== Budget constraints =====
  
 Assume that the amount a consumer can spend is equal to their income. Assume that the amount a consumer can spend is equal to their income.
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 A change in prices will cause the slope and intercepts to change. A change in the budget will cause the intercepts to change, but not the slope. A change in prices will cause the slope and intercepts to change. A change in the budget will cause the intercepts to change, but not the slope.
  
-===== Constrained choices =====+==== Constrained choices ====
  
 Consumers will achieve the most utility given the constraint of their budget. Graphically, this means that they will achieve the highest indifference curve (each of which has represents one value of utility) that intersects with the budget constraint curve. Therefore, the optimal point is the point of the indifference curve that is tangent to the budget constraint curve. Consumers will achieve the most utility given the constraint of their budget. Graphically, this means that they will achieve the highest indifference curve (each of which has represents one value of utility) that intersects with the budget constraint curve. Therefore, the optimal point is the point of the indifference curve that is tangent to the budget constraint curve.
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 As a reminder, MRT is the amount of one good you are willing to give up in exchange for another, and MRS is the amount of one good that the market is asking you to give up in exchange for another (because of budget constraints). A consumer will effectively trade one good for another until these two quantities are equal. As a reminder, MRT is the amount of one good you are willing to give up in exchange for another, and MRS is the amount of one good that the market is asking you to give up in exchange for another (because of budget constraints). A consumer will effectively trade one good for another until these two quantities are equal.
 +
 +===== Paternalism =====
 +
 +Paternalism is the government imposing its preferences on consumers.
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