Explain the notion of the marginal rate of substitution and how it relates to the utility maximizing solution.

INDIFFERENCE CURVE ANALYSIS: AN ALTERNATIVE APPROACH TO UNDERSTANDING CONSUMER CHOICE

L E A R N I N G O B J E C T I V E S

1. Explain utility maximization using the concepts of indifference curves and budget lines.

2. Explain the notion of the marginal rate of substitution and how it relates to the utility maximizing solution.

3. Derive a demand curve from an indifference map.