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This is how we construct an indifference curve: Consider bundles that contain only two goods so that we can use a two-dimensional graph to represent them, where a particular bundle containing Wa ounces of wine along with Ba slices of bread is represented as a single point, a.
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3. UTILITY THEORY: MODELING PREFERENCES AND TASTES
t our consumerâ€™s preferences graphically, not just mathematically. To that end, we introduce the concept of an indifference curve , which represents all the combinations of two goods such that the consumer is entirely indifferent among them. <span>This is how we construct such a curve: Consider bundles that contain only two goods so that we can use a two-dimensional graph to represent themâ€”as in Exhibit 1, where a particular bundle containing W a ounces of wine along with B a slices of bread is represented as a single point, a. The assumption of non-satiation (more is always better) ensures that all bundles lying directly above, directly to the right of, or both above and to the right (more wine and more bread