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#cfa #cfa-level-1 #economics #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #section-3-utility-theory #study-session-4
the MRSBW is the negative of the slope of the tangent to the indifference curve at any given bundle. If, at some point, the slope of the indifference curve had value –2.5, it means that, starting at that particular bundle, our consumer would be willing to sacrifice wine to obtain bread at the rate of 2.5 ounces of wine per slice of bread.
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3. UTILITY THEORY: MODELING PREFERENCES AND TASTES
early as much wine to obtain a little more bread. This suggests that the value being placed on bread, in terms of the amount of wine the consumer is willing to give up for bread, diminishes the more bread and less wine he has. It follows that <span>the MRS BW is the negative of the slope of the tangent to the indifference curve at any given bundle. If, at some point, the slope of the indifference curve had value –2.5, it means that, starting at that particular bundle, our consumer would be willing to sacrifice wine to obtain bread at the rate of 2.5 ounces of wine per slice of bread. Because of the convexity assumption—that MRS BW must diminish as he moves toward more bread and less wine—the MRS BW is continuously changing as he moves along his indifference curve.


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