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The slope of the indifference curve at any point is given by Igf'xl [note the negative sign]. I derive the result for the slope in
The slope of the indifference curve at any point is given by Igf'xl [note the negative sign]. I derive the result for the slope in a lecture. I am not going to test you on the derivation but I do expect you to know how to use the result. A. Given this slope, and what we learned about optimal choices and the tangency between the indifference curve and the budget line, determine the actual utility maximizing choices (quantities of each good purchased} for the three price pairs in problem 1. Pair1: 191: pg: 40 Pair 2:131 = 20; p2 = 40 Pair 3:1}1 = 10; p2 = 40 B. Calculate the income and substitution effects for moving from the original outcome associated with prices in Fair 1 to the prices associated with Pair 2. Assume the utility function is multiplicative with exponents a = b = 1: sss U(xl,12) = x1352
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