Ch04 DEMAND THEORY – A MATHEMATICAL TREATMENTA.doc

Chapter4:Appendix58CHAPTER4APPENDIXDEMANDTHEORY–,andwhicharenot?(X,Y)=2X+(X,Y)=(XY)(X,Y)=Min(X,Y),,,;thesecondasaseriesofhyperbolas;andthethirdasaseriesof“L’s.”(X,Y)=2X+5Y,setutilitytosomegivenlevelU0andsolveforYtogetSincethisistheequationforastraightline,:Appendix59Tographtheindifferencecurvesthatrepresentthepreferencesgivenby,,youwillbeabletographtheindifferencecurveU0,,,firstnotethatutilityfunctionsofthisformresultinindifferencecurveswhichareL-,foranygivenlevelofutilityU0,,,thenutilitywillchangeandwewillmovetoadifferentindifference