Patterns Consumer Theory (AKA Chunking Knowledge, Making Neural Connections)
TOPICS -
What two variables are on the axes?
What are different ways to label the axes?
What does it mean when Dollars are used as a unit of measurement along the vertical axis? (Indifference curve only)
What assumptions about individual choice underlie each curve?
Draw a 3-dimensional image of the Utility function and Production function. What do they look like in 2-dimensions?
What does a point on each line represent? Describe a point. Pick another point on the same line. How do the 2 points relate?
What is the equation for the lines? Write in symbols and explain in words.
Give a story (e.g., with made-up values) to explain exactly what each equation is saying. Think of each line as the lazy economists way of writing paragraphs of meaning.
Carefully explain the notation for the endpoints of the Budget Constraint and Isocost line. I will automatically deduct 2 points from your exam if these endpoints are not correctly labeled. Why?
What's held constant along each line?
What happens when the constant variable increases? Explain in words and graph.
What happens when the constant variable decreases? Explain in words and graph.
Explain the slope of each line. Use symbols, Economic Terms and regular English words.
Explain WHY the slope of the Indifference curve and Isoquant are not constant along the line. What does it mean? Give an example, a story to illustrate why the lines curve. Use the symbols to show what is happening that makes the lines curve.
What does it mean when the Indifference curve and budget constraint touch? Explain in symbols and words. Do same for Isoquant and Isocost.
What does it mean when the budget constraint intersects the indifference curve at two points?
Explain in symbols and words.
Do same for Isoquant and Isocost.
Give examples where the budget constraint can be kinked. Is this also possible for the Isocost line?
SHAPE OF THE INDIFFERENCE CURVE -
To understand the shape and what it "says" you must be able to make the connection to the slope. Draw difference shapes of the indifference curve and give a "real world" example of the preferences illustrated by that shape (hint your example will depend on what you put on the vertical and horizontal axis).
DO NOT be limited by the size of the boxes on the spreadsheet.
Attachment:- Assignment File.rar