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Suppose that you have five consumption choices: good . An indifference surface is the set of consumption choices with a CONSTANT utility. For example if
Suppose that you have five consumption choices: good
An indifference surface is the set of consumption choices with a CONSTANT utility. For example if
gives the same utility as
than these are both points on the same indifference surface. An indifference map is the set of all indifference surface for EVERY given utility.
Consider the following utility map:
Where
The budget constraint gives the set of possible consumption choices with a given income. If you have an income of $ and the price of good
is given by
The equation for the budget line is given by:
A utility maximizing combination of goods
occurs when the surface given by the budget constraint is tangent to an indifference surface.
Find
as a function of
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