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ECON 2P21 (3)
Lecture

Lecture notes 8.pdf

27 Pages
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Department
Economics
Course Code
ECON 2P21
Professor
Katerina Koka

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Description
8    otes Lecture       *) ,2 2 /1 *1x  btained  ‐  x  re  hoice  o constraint,ng  uudgget,   0  heeav emands     budgetve 2 *   *)    ur rdinar2  he ,  onsan)ineduusts    f 1x   *2  he *  x   *x 1  nd tference x 1 p  lo he           ilks’,e the f equaal Raattionnaall yo            Whaenand b b (a)(b)andare • • •      he  naryto   di  o  r ect  hoice h solution      u hn ty 0  orner      t *2  t zg  ?    s m  onstra ned 0r 2) ii     *,x ax  f =? x1 (x   2 er    onstraint.  hat  t bl Raattionnaa l  h ButtOr I demandbudget • • •   the  ‐‐ Case   x1 Solutions   btitutes Su  orner  f fct MRS = -1 Per Examplesx .2   > p 1 the  ‐‐ w2th p  ase /1 1 x Solutions   btitutes Slope = -p  orner  f ect f MRS = -1 Per 2 Examplesx .2   > p 1 the  ‐‐ w2th p  ase /1 1 x Solutions   btitutes Slope = -p  orner  f ect f MRS = -1 Per 2 Examplesx 2   1 p the  ‐‐ with p 2  ase 1p 1 x Solutions   btitutes Slope = -p  orner of   fct MRS = -1 Per 0 *1 x2 y 2 x Examples = p *x2 2   1 p the  ‐‐ with p 2  ase 1p 1 x Solutions   btitutes y 1 Slope = -p=p  orner *x of   fct MRS = -1 Per x2 = Examples *2 x   the *2 . *,x 2 2  ‐‐ 1 < p > p 1 1  ase if p if p ,2he most Solutions ⎞ ⎟ ⎠ ⎞ ⎟ ⎠   +1x , y p btitutes y p 0 )= x ⎛ = ⎝ ⎛ = ⎝  orner x2 *2 *2 of x1 , ,   fct( *x1 *x1 ( ( Per ExampleSop wrheerred affordable bundle is (x   2 the 1 p  ‐‐ p th Case w   p x 1  olutions stitutes b y p Corner ope = -p   Sl  f fct MRS = -1 Per 2 y p2 Examplesx   e th the y  ‐‐ ll . p2 Case =p   p1 x1 tare equa  olutions i heen p stitutes tt w hltl b most preferrydpaffordable Corner   Allohesbundles in the  f fct Per 2 y p Examplesx   the  ‐‐ 2 1 1 ax  ase =ax x x  olution=in{ax lment2 = min{ax 1 ‘Kinky’    omp U(x  f fct Per 2 Examplesx   the  ‐‐ 2 1 1 ax MRS = 0  ase =ax x x  olution=in{ax lment2 = min{ax 1 ‘Kinky’    omp U(x  f fct Per 2 Examplesx   the  ‐‐ }2 1 ,1 - ax MRS = 0  ase = =ax x2
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