W hen you walk into a store, you are confronted with thousands of goods that
-2a Representing Preferences with
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Representing Preferences with Indifference Curves The consumer’s preferences allow her to choose among different bundles of pizza and Pepsi. If you offer the consumer two different bundles, she chooses the bun- dle that best suits her tastes. If the two bundles suit her tastes equally well, we say that the consumer is indifferent between the two bundles. Just as we have represented the consumer’s budget constraint graphically, we can also represent her preferences graphically. We do this with indifference curves. An indifference curve shows the various bundles of consumption that make the consumer equally happy. In this case, the indifference curves show the combinations of pizza and Pepsi with which the consumer is equally satisfied. Figure 2 shows two of the consumer’s many indifference curves. The consumer is indifferent among combinations A, B, and C because they are all on the same curve. Not surprisingly, if the consumer’s consumption of pizza is reduced, say, from point A to point B, consumption of Pepsi must increase to keep her equally happy. If consumption of pizza is reduced again, from point B to point C, the amount of Pepsi consumed must increase yet again. The slope at any point on an indifference curve equals the rate at which the consumer is willing to substitute one good for the other. This rate is called the marginal rate of substitution (MRS). In this case, the marginal rate of substitution measures how much Pepsi the consumer requires to be compensated for a one- unit reduction in pizza consumption. Notice that because the indifference curves are not straight lines, the marginal rate of substitution is not the same at all points on a given indifference curve. The rate at which a consumer is willing to trade one good for the other depends on the amounts of the goods she is already con- suming. That is, the rate at which a consumer is willing to trade pizza for Pepsi depends on whether she is hungrier or thirstier, which in turn depends on how much pizza and Pepsi she is consuming. The consumer is equally happy at all points on any given indifference curve, but she prefers some indifference curves to others. Because she prefers more tải về 1.28 Mb. Chia sẻ với bạn bè của bạn:
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