清华大学中级微观经济学Tsinghua_Micro_Ch04.pdfVIP

Chapter Four Utility 效用 Statement of Rights • The following content is based on the slides provided by Norton Publishers for Hal Varian: Intermediate Microeconomics 4th edition and modified by Professor David Daokui Li for the purpose of teaching Intermediate Microeconomics at Tsinghua University. • Other uses of the content without the approval of Norton Publishers, Tsinghua University, and Professor David Daokui Li are strictly prohibited. • All rights provided by relevant laws are reserved. What Do We Do in This Chapter? • We create a mathematical measure of preference in order to advance our analysis. Utility Functions • A preference relation that is complete, reflexive, transitive and continuous can be represented by a continuous utility function. Utility Functions • A utility function U(x) represents a preference relation if and only if: f ~ p x’ x” U(x’) U(x”) x’ x” U(x’) U(x”) p x’ ~ x” U(x’) = U(x”). Utility Functions • Utility is an ordinal (i.e. ordering) concept. • E.g. if U(x) = 6 and U(y) = 2 then bundle x is strictly preferred to bundle y. But x is not preferred three times as much as is y. Utility Functions Indiff. Curves • All bundles in an indifference curve have the same utility level. • U(x1, x2)=Constant is the equation of an indifference curve. Utility Functions Indiff. Curves x p 2 (2,3) (2,2) ~(4,1) U 6