ECON281 Lecture Notes - Lecture 9: Indifference Curve, Pineapple, Budget Constraint

• School: University of Alberta
• Department: Economics
• Course: ECON281
• Professor: Lorne Priemaza

Document Summary

A basket is an interior optimum if positive amounts of all goods are purchased and the indifference curve is tangent to the budget line. 3) use (1) and (2) to solve for the maximizing point. 4) find the optimum (if possible) and conclude. Vincent fingers mcginy enjoys two things: skittles (s) and bubble gum (b). A pack of skittles costs while bubble gum costs . 2) mus / mub = ps / pb. Fingers buys 12 bubble gum and 4 packs of skittles in order to maximize his utility: optional budget check: 2s + b = 20. Interior optimums occur when positive amounts of both goods are consumed to maximize utility. Not everyone will maximize utility by consuming both goods: not everyone buys a porsche, not everyone values ballet shoes highly. When utility is maximized and one good is not consumed, a corner solution exists.