Intermediate Microeconomics: A Modern Approach (Ninth Edition)
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Rigorous and modern―the #1 text for Intermediate Microeconomics from the chief economist at Google.
This best-selling text is still the most modern presentation of the subject. The Varian approach gives students tools they can use on exams, in the rest of their classes, and in their careers after graduation.
curves that slope up and to the right as depicted in Figure 3.5. The direction of increasing preference is down and to the right-that is, toward the direction of decreased anchovy consumption and increased pepperoni consumption, just as the arrows in the diagram illustrate. Neutrals A good is a neutral good if the consumer doesn't care about it one way or the other. What if a consumer is just neutral about anchovies?' In this case his indifference curves will be vertical lines as depicted in
equation for d x 2 ( z l ) / d x l to find just as we had before. The implicit function method is a little more rigorous, but the differential method is more direct, as long as you don't do something silly. Suppose that we take a monotonic transformation of a utility function, say, v ( x l ,x 2 ) = f ( u ( x l ,x 2 ) ) . Let's calculate the MRS for this utility function. Using the chain rule af/au MRS=--av/ax2 d f / a u auldxz av/axl au/azl A - -du/axl du/ax2 since the d f / a u term
cost 1- &a bus& &at eust less than X, and so on. 124 R E V E A L E D P R E F E R E N C E (Ch. 7) Thus, in Figure 7.3, we can conclude that all of the bundles in the upper shaded area are better than X , and that all of the bundles in the lower shaded area are worse than X, according to the preferences of the consumer who made the choices. The true indifference curve through X must lie somewhere between the two shaded sets. We've managed to trap the indifference curve quite tightly simply by an
a parallel shift of the budget line is the movement that occurs when income changes while relative prices remain constant. Thus the second stage of the price adjustment is called the income effect. We simply change the consumer's income from m' to 7n, keeping the prices constant at (p;, p2). In Figure 8.2 this change moves us from the point (y1, y2) to (zl , z2). It is natural to call this last movement the income effect since all we are doing is changing income while keeping the prices fixed at
choice describes the demand for leisure measured from the origin to the right, and the supply of labor measured from the endowment to the left. lottery and got a big increase in nonlabor income, what would happen to your supply of labor? What would happen t o your demand for leisure? For most people, the supply of labor would drop when their money income increased. In other words, leisure is probably a normal good for most people: when their money income rises, people choose to consume more