Chapter 3 Preferences This chapter is more abstract and therefore needs somewhat more motivation than the previous chapters. It might be a good idea to talk about relations in general before introducing the particular idea of preference relations. Try the relations of"taller, and "heavier. " and "taller and heavier. Point out that aller and heavier" isnt a complete relation, while the other two are. This general discussion can motivate the general idea of preference relations Make sure that the students learn the specific examples of preferences suck as perfect substitutes, perfect complements, etc. They will use these examples any, many times in the next few weeks When describing the ideas of perfect substitutes, emphasize that the defining characteristic is that the slope of the indifference curves is constant, not that it is-1. In the text, I always stick with the case where the slope is -l, but in the workbook, we often treat the general case. The warning goes with the perfect complements case. I work out the symmetric case in the text and try to get the students to do the asymmetric case in the workbook. The definition of the marginal rate of substitution is fraught with "sign confusion. "Should the mrs be defined as a negative or a positive number? I've chosen to give the MRS its natural sign in the book, but I warn the students that many economists tend to speak of the MRS in terms of absolute value. Example diminishing marginal rate of substitution refers to a situation where the absolute value of the mrs decreases as we move along an indifference curve. The actual value of the MRS (a negative number) is increasing in this movement Students often begin to have problems with the workbook exercises here The first confusion they have is that they get mixed up about the idea that indifference curves measure the directions where preferences are constant, and instead draw lines that indicate the directions that preferences are increasing The second problem that they have is in knowing when to draw just arbitrary curves that qualitatively depict some behavior or other, and when to draw exact Try asking your students to draw their indifference curves between five dollar ills and one dollar bills. Offer to trade with them based on what they draw. In ddition to getting them to think, this is a good way to supplement your facult salaryChapter 3 7 Chapter 3 Preferences This chapter is more abstract and therefore needs somewhat more motivation than the previous chapters. It might be a good idea to talk about relations in general before introducing the particular idea of preference relations. Try the relations of “taller,” and “heavier,” and “taller and heavier.” Point out that “taller and heavier” isn’t a complete relation, while the other two are. This general discussion can motivate the general idea of preference relations. Make sure that the students learn the specific examples of preferences such as perfect substitutes, perfect complements, etc. They will use these examples many, many times in the next few weeks! When describing the ideas of perfect substitutes, emphasize that the defining characteristic is that the slope of the indifference curves is constant, not that it is −1. In the text, I always stick with the case where the slope is −1, but in the workbook, we often treat the general case. The same warning goes with the perfect complements case. I work out the symmetric case in the text and try to get the students to do the asymmetric case in the workbook. The definition of the marginal rate of substitution is fraught with “sign confusion.” Should the MRS be defined as a negative or a positive number? I’ve chosen to give the MRS its natural sign in the book, but I warn the students that many economists tend to speak of the MRS in terms of absolute value. Example: diminishing marginal rate of substitution refers to a situation where the absolute value of the MRS decreases as we move along an indifference curve. The actual value of the MRS (a negative number) is increasing in this movement! Students often begin to have problems with the workbook exercises here. The first confusion they have is that they get mixed up about the idea that indifference curves measure the directions where preferences are constant, and instead draw lines that indicate the directions that preferences are increasing. The second problem that they have is in knowing when to draw just arbitrary curves that qualitatively depict some behavior or other, and when to draw exact shapes. Try asking your students to draw their indifference curves between five dollar bills and one dollar bills. Offer to trade with them based on what they draw. In addition to getting them to think, this is a good way to supplement your faculty salary