Three Examples
Examples of Indifference Curves
• We are going to do some special cases to
illustrate how some special indifference
curves look.
Lectures in Microeconomics-Charles W. Upton
Examples of Indifference
Curves
Coke® or Pepsi®
Coke® or Pepsi®
• I don’t care whether you have Coke® or
Pepsi®, as long as it is cola.
• I don’t care whether you have Coke® or
Pepsi®, as long as it is cola.
• This is a case we discussed earlier: perfect
substitutes.
Examples of Indifference
Curves
Coke
Examples of Indifference
Curves
Coke and Pepsi
4
5
7
3
2 \
8
1
Coke
4
5
6
Examples of Indifference
Curves
Coke and Pepsi
7
3
2 \
8
1
Pepsi
6
Examples of Indifference
Curves
Pepsi
1
Coke
Coke and Pepsi
4
5
7
I1
2 \
I2
3
I1
8
6
1
Examples of Indifference
Curves
Coke
Coke
Coke and Pepsi
4
5
7
3
2 \
8
6
1
Pepsi
Pepsi
Examples of Indifference
Curves
Coke and Pepsi
Left and Right Shoes
• Perfect Complements
I3
I2
I1
4
5
7
3
2 \
8
6
1
Examples of Indifference
Curves
Right
Shoes
Pepsi
Left and Right Shoes
7
3
2 \
8
1
Right
Shoes
4
5
Left and Right Shoes
4
5
6
Examples of Indifference
Curves
Examples of Indifference
Curves
7
3
2 \
8
1
Left
Shoes
6
Examples of Indifference
Curves
I1
Left
Shoes
2
Right
Shoes
Left and Right Shoes
4
5
7
3
2 \
8
1
Right
Shoes
Examples of Indifference
Curves
4
5
I2
6
Left and Right Shoes
I1
7
3
2 \
8
I2
6
1
Left
Shoes
I1
Left
Shoes
Examples of Indifference
Curves
Third Example
• Indifference curves between Bourbon and
Temperance Lectures for W.C. Fields and
Carrie Nation.
I3
Third Example
• Indifference curves between Bourbon and
Temperance Lectures for W.C. Fields and
Carrie Nation.
– W. C. Fields was a movie actor with a
legendary drinking problem.
Examples of Indifference
Curves
Third Example
Examples of Indifference
Curves
W. C. Fields
Bourbon
• Indifference curves between Bourbon and
Temperance Lectures for W.C. Fields and
Carrie Nation.
– W. C. Fields was a movie actor with a
legendary drinking problem.
– Carrie Nation was a prominent leader in the
temperance movement.
5
7
2\
1
Examples of Indifference
Curves
4
3
8
I4
I3
6
Examples of Indifference
Curves
I2
I1 Temperance
Lectures
3
Carrie Nation
Bourbon
I2
I1
5
7
2\
1
I3
Apples and Bananas
I4
• I like apples and bananas. If you cut the
number of apples in half and double the
number of bananas, I am just as well off.
4
3
8
6
Temperance
Lectures
Examples of Indifference
Curves
Examples of Indifference
Curves
Apples and Bananas
• I like apples and bananas. If you cut the
number of apples in half and double the
number of bananas, I am just as well off.
• This is a more standard case.
Apples and Bananas
• I like apples and bananas. If you cut the
number of apples in half and double the
number of bananas, I am just as well off.
• This is a more standard case.
• It actually corresponds to U(A, B) = AB
Examples of Indifference
Curves
Apples and Bananas
• I like apples and bananas. If you cut the
number of apples in half and double the
number of bananas, I am just as well off.
• This is a more standard case.
• It actually corresponds to U(A, B) = AB
• To see this, note that
(0.5A)(2B) = AB.
Examples of Indifference
Curves
Examples of Indifference
Curves
A
Apples and Bananas
5
7
2\
1
4
3
8
6
Examples of Indifference
Curves
I1
B
4
A
Apples and Bananas
5
7
2\
1
A
4
5
7
3
8
2\
I2
6
Examples of Indifference
Curves
Apples and Bananas
I1
4
3
8
I2
6
1
B
I3
Examples of Indifference
Curves
I1
B
More to Come
• Done
– The Basic Model of Utility Maximization
– Some Applications to Indifference Curve
End
• We continue this topic in the next lecture.
©2004 Charles
W. Upton
Examples of Indifference
Curves
Examples of Indifference
Curves
5