Econ 250 Terms

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Weak Monotonicity

If an entire bundle x is greater than y, you will prefer x automatically

Strong Monotonicity

If only a part of bundle x is greater than y, you will prefer x automatically

Convexity

If the IC is linear, (“Average is preferred to extremes”)

Strong Convexity

IC is non-linear and tangent to budget line

Continuity

If you prefer A to B, you will also prefer points closer to A to B

Transitivity

Weak bundle preferences are not recycled, a>b and b>c means a>c, (Being able to logically organize preferences)

Completeness

Being able to decide whether you are indifferent or strictly prefer a bundle.

Reflexivity

You are indifferent when comparing a package to itself

Well behaved preferences

convexity and monotonicity

Rational preferences

Completeness and transitivity

What does a convex-leaning consumer prefer?

To consume the goods together

What does a concave-leaning consumer prefer?

To consume the goods separately

Indifference Curve

Bundles with the same utility

Perfect Substitute def

When substitution happens at a constant rate

What does the graph of perfect substitutes look like?

Linear

What does the graph of perfect complements look like?

L shaped

Perfect Complements def

The consumer becomes indifferent to the bundles if the complement ratio is not followed

MRS

The rate at which a consumer is willing to substitute one good for another, marginal willingness to pay