2 Preferences and Indifference Curves Free Online FlashCards

What does $x \succeq y$ mean?

Weak preference means the consumer considers bundle $x$ at least as good as bundle $y$.

What do utility numbers ordinarily represent?

Utility numbers ordinarily represent the order of preferences, not measurable amounts of happiness. A utility of $10$ does not necessarily mean twice the satisfaction of a utility of $5$.

What is completeness of preferences?

Completeness means any two bundles can be compared: one is weakly preferred to the other, or both are, meaning the consumer is indifferent.

What does an indifference curve represent?

An indifference curve is the set of bundles that are all equally preferred to a particular bundle.

What trade-off links bundles $(2,10)$ and $(4,6)$ if they are indifferent?

Moving from $(2,10)$ to $(4,6)$ adds two sandwiches and gives up four coffees, with no change in preference ranking.

Why do indifference curves slope downward under monotonicity?

With monotonic preferences for both goods, an indifference curve slopes downward: getting more of one good while staying equally preferred requires giving up some of the other.

When is $x$ strictly preferred to $y$?

The consumer strictly prefers $x$ to $y$: $x$ is weakly preferred to $y$, but $y$ is not weakly preferred to $x$.

What does it mean for $x$ and $y$ to be indifferent?

The consumer regards the bundles as equally good: $x \succeq y$ and $y \succeq x$.

What is transitivity of preferences?

Transitivity means that if $x \succeq y$ and $y \succeq z$, then $x \succeq z$. It rules out inconsistent ranking cycles.

What is an indifference map?

An indifference map is a collection of indifference curves that represents preferences across many bundles.

Why can’t indifference curves for different preference levels intersect?

They cannot cross: a shared bundle and transitivity of indifference would make bundles on different curves equally preferred, contradicting their distinct preference levels.

What does the marginal rate of substitution measure?

The marginal rate of substitution describes how much of one good a consumer would give up for an additional amount of another while remaining indifferent.