Mathematical presentation of indifference curve, Macroeconomics

Assignment Help:

Mathematical Presentation:

Consider the utility function U = U(x1, x2). Differentiating totally, we get the following: dU = U1dx1 + U2dx2 = 0 (as along the indifference curve utility is constant, dU = 0). Therefore, 2242_mathmatical repsentaion.png, which is the slope of the indifference curve. It is negative since U1(x1, x2) >0 and U2(x1, x2) >0 by assumption of non-satiation of all goods. Thus, indifference curve is downward sloping because all goods are non-satiated, choice is continuous, reflexive and complete. Economic meaning All goods are non-satiated i.e., larger  (lower) consumption leads to lager (lower) utility. Hence, for given x2, as x1 increases, utility increases. Thus, to maintain same level, utility must be reduced, which is possible by reducing x2. Hence, as x1 increases, x2 must decreases in order to maintain same level of utility. That is why indifference curve is downward sloping.  

 


Related Discussions:- Mathematical presentation of indifference curve

National income, # ???? .. difference between gdp at market price and nnp...

# ???? .. difference between gdp at market price and nnp at factor cost

Kind of organization, Informal groups exist in almost every kind of organiz...

Informal groups exist in almost every kind of organization. Answer the following questions and provide examples to support your position: • What types of informal groups do you

A history of canadian economy, i have an assignment i need it to be done by...

i have an assignment i need it to be done by thursday march the 10th before midnight

What would be due process require in circumstances, The Russ College of Eng...

The Russ College of Engineering and Technology of Ohio University announced in a press conference that it had found "rampant and flagrant plagiarism" in the theses of mechanical en

Purposes economists disagree and using models of economics, Explain the pur...

Explain the purposes economists disagree and using models of economics. Using Models of Economics: a. Positive economics b. Normative economics A forecast is an easy p

Price elasticity, Price 10,9,8,7,6,5,4,3,2,1 QD 0,1,2,3,4,5,6,7,8,9,10 TR? ...

Price 10,9,8,7,6,5,4,3,2,1 QD 0,1,2,3,4,5,6,7,8,9,10 TR? Ed?.

Medical goods or services, For which of the following medical goods or serv...

For which of the following medical goods or services is the income elasticity of demand largest? a. emergency services after a car accident b. measles shots c. physical ex

Fiscal, what is the supply side

what is the supply side

Construction of real gross domestic product, Q. Construction of real gross ...

Q. Construction of real gross domestic product ? To be able to make reasonable comparisons of GDP over time, we should adjust for inflation. For instance, if prices are doubled

Internal market forces, what are some internal market forces and how is the...

what are some internal market forces and how is the outcome of output, jobs, prices, growth, and international balance

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd