Karim's Indifference Map

Comparing Utility of Points On and Off an Indifference Curve

Indifference Map for Free Time vs. Final Grade

Limitation of Indifference Maps: Incomplete Preference Ranking

Consider a standard indifference map showing a consumer's preferences for two goods. The map displays two specific indifference curves, I₁ and I₂. Any bundle of goods on curve I₂ provides the consumer with a higher level of satisfaction than any bundle on curve I₁. Point A lies on curve I₁. Point B lies on curve I₂. Points C and D are two distinct bundles both located in the unlabeled space between curves I₁ and I₂. Based solely on this information, which of the following statements about the consumer's preferences must be true?

Evaluating Preferences with an Incomplete Map

A consumer's preferences for two goods are represented by an indifference map. The map shows two specific indifference curves, IC₁ and IC₂. Any bundle of goods on curve IC₂ provides a higher level of satisfaction than any bundle on curve IC₁. Bundles A and B both lie on curve IC₁. Bundle C lies on curve IC₂. Which of the following statements accurately synthesizes the consumer's preferences?

Consider a diagram showing a consumer's preferences with two indifference curves, Curve A and Curve B, where Curve B represents a higher level of satisfaction than Curve A. If two distinct consumption bundles, X and Y, are both located in the physical space on the graph between Curve A and Curve B, it is always possible to determine which bundle the consumer prefers without any additional information.

Analyzing the Limitations of an Indifference Map

Evaluating the Indifference Map as a Model of Preference

An indifference map shows a consumer's preferences for two goods. The map has two curves, IC₁ and IC₂, where any bundle on IC₂ is preferred to any bundle on IC₁. Points A and B are on IC₁. Point C is on IC₂. Points D and E are two distinct bundles located in the space between IC₁ and IC₂. Match each comparison of points with the correct statement about the consumer's preference.

While an indifference map effectively illustrates that bundles on higher curves are preferred to those on lower curves, it fails to provide a complete ranking of all possible bundles. This is because a standard map does not allow for a direct preference comparison between two distinct bundles located in the space between the explicitly drawn curves. Therefore, an indifference map is said to provide only a(n) _________ ranking of preferences.

Consumer Choice Scenario

Evaluating a Claim about Preferences

Applying the 'More is Better' Principle to Work-Leisure Bundles

Activity: Constructing an Indifference Curve

Karim's Indifference Map

Indifference Between Consumption-Leisure Bundles

Comparing Bundles and MRS Along a Vertical Line

Calculus-Based MRS Calculation at Point A

Abundance, Marginal Utility, and MRS Along a Horizontal Line

Karim's Indifference Map

An individual's preferences for daily free time (t, in hours) and consumption (c, in dollars) can be represented by a set of curves defined by the equation (t - 6)(c - 45) = k, where k is a constant representing a specific level of satisfaction. If this person is currently satisfied with 16 hours of free time and a consumption of $55, what level of consumption would be required to maintain the exact same level of satisfaction if their free time were to decrease to 11 hours?

Interpreting an Indifference Curve Equation

Isolating a Variable in an Indifference Curve Equation

Comparing Consumption Bundles

A person's preferences for daily free time (t, in hours) and consumption (c, in dollars) are modeled by a family of curves where (t - 6)(c - 45) = k, and k is a positive constant representing a specific level of satisfaction. Based on this model, a combination of 5 hours of free time and $100 of consumption would yield a positive level of satisfaction.

Interpreting Utility Function Parameters

An individual's preferences for daily free time (t, in hours) and consumption (c, in dollars) are modeled by a set of indifference curves where (t - 6)(c - 45) = k, with k representing the level of satisfaction. Match each consumption bundle in the left column with a bundle from the right column that provides the exact same level of satisfaction.

Evaluating Trade-offs Along a Satisfaction Curve

An individual's satisfaction from daily free time (t, in hours) and consumption (c, in dollars) is described by an equation where (t - 6)(c - 45) = u, and u is a constant value representing the level of satisfaction for a specific preference curve. For this individual, the combination of 10 hours of free time and $95 of consumption provides the exact same level of satisfaction as 26 hours of free time and$55 of consumption. The constant level of satisfaction, u, for this specific preference curve is ____.

Consider an individual whose preferences for daily free time (t, in hours) and consumption (c, in dollars) are represented by the family of curves where (t - 6)(c - 45) = k, with k being a positive constant for any given curve. This equation implies that to maintain the same level of satisfaction, the amount of consumption the individual is willing to give up for one additional hour of free time is constant, regardless of how much free time they currently have.