Tsinghua Micro Ch4 Utility 效用 《微观经济学》.ppt

Chapter Four Utility 效用 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 can be represented by a utility function. Utility Functions A utility function U(x) represents a preference relation if and only if: x’ x” U(x’) U(x”) x’ x” U(x’) U(x”) 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 Utility Functions Indiff. Curves The collection of all indifference curves for a given preference relation is an indifference map. An indifference map is equivalent to a utility function. Utility Functions If U is a utility function that represents a preference relation and f is a strictly increasing function, then V = f(U) is also a utility functionrepresenting . Goods, Bads and Neutrals A good is a commodity unit which increases utility (gives a more preferred bundle). A bad is a commodity unit which decreases utility (gives a less preferred bundle). A neutral is a commodity unit which does not change utility (gives an equally preferred bundle). Goods, Bads and Neutrals Some Other Utility Functions and Their Indifference Curves Consider V(x1,x2) = x1 + x2.What do the indifference curves for this “perfect substitution” utility function look like? Perfect Substitution Indifference Curves Perfect Substitution Indifference Curves Some Other Utility Functions and Their Indifference Curves Consider W(x1,x2) = min{x1,x2}.What do the indifference curve