Class Guide March 26th

1
Class Guide March 26th

• Write down the basic concept and fill in
  the blanks with the presentation
• Budget constraint________________________________
  _______________
• Budget line is____________________________________
  _______________
• Increase in income will shift the budget line
  __________and decrease in income will shift the
  budget line __________
• When the price of good changes, the budget line
  will ________, both its ________and one of its
  _______will change.
• Rationality are logically ____________,
  _____________ and _________________.
• With the feeling More is Better, the consumer
  will always choose a point __ the budget line
  rather than ______ it.
• There are two approaches that will help consumer
  make decision________________
• and ____________________.
• Utility is __________________________________, it
  is measure by _________ or ______________.
• Total Utility is _________________________________
  _____.
• Marginal Utility is ______________________________
  _____.
• The marginal utility curve shows the ______ of
  the total utility curve. As the TU curve becomes
  flatter and flatter, the value of the slope is
  becoming __________________.
• The Law of diminishing marginal utility states
  __________________________________________.
• The Utility maximizing condition is
  ______________, that is, a utility-maximizing
  consumer will choose the point on the budget line
  where ___________________ is the same for both
  goods

2
Exercises

• Marginal Utility approach
• Suppose Max average spend 300 on entertainment
  each month, he can choose to go to concerts which
  costs 30 each time, or he can choose go to
  movies which costs 10 each time. His marginal
  utility from last concert and last movie at
  different times of concerts and movies is given
  in the following sheet.
• Draw the budget line given the information from
  the table.
• Fill in the blanks for the missing values, and
  find utility maximizing combination of concerts
  and movies. At what point does Max end up?

of movies
of concerts