Answered step by step
Verified Expert Solution
Question
1 Approved Answer
ndifference Curves are a graphical representation of a person's Tastes and Preferences , i.e. how much enjoyment (utiity) a person gets out of consuming a
ndifference Curves are a graphical representation of a person's Tastes and Preferences , i.e. how much enjoyment (utiity) a person gets out of consuming a good. The indifference curve measures enjoyment (utility) with an unusual metric and employs the concept of Revealed Preference. Revealed Preference is the idea that a person's behavior provides information about what a person's thoughts are. In the case of indifference curves, we use Revealed Preference to measure how much a person likes a good. This is done by giving the person a choice between 2 alternatives, A and B. If the person chooses A rather than B, he has revealed that he likes A more than B. When this is applied to bundles of goods, it allows us to rank bundles of goods. If a person is given a choice of (10A, 10B) or (12A, 8B) and chooses (10A,10B) over (12A, 8B) he has revealed that the first bundle gives him more enjoyment or makes him happier than the second bundle. An indifference curve shows bundles where if given a choice, the person doesn't care what bundle he receives because they all make him equally happy. He is indifferent between bundles on an indifference curve
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started