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Lecture 4

eco 204 lecture 4 detailed note

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Department
Economics
Course
ECO204Y1
Professor
Sayed Ajaz Hussain
Semester
Fall

Description
University of Toronto Department of Economics ECO 204 2011 - 2012 Sayed Ajaz Hussain Lecture 4 Sayed Ajaz Hussain, Department of Economic1, University of Toronto, STG Last Week .. Model choice of consumption levels of commodities Physical restrictions on consumption represented in Typically: = , 0 1 2 Assume rational preferences Assume preferences representable by a utility function Indifference curve slope = = 1= 1 2 2 Consumer chooses optimal amounts by UMP: max ,1 2 ..1 1+ 2 2 , 1, 2 1,2 Expenditure Income Typically = 1,2 0 Sayed Ajaz Hussain, Department of Economics Feedback? [email protected] University of Toronto, STG 2 T oday Setting up and Solving UMPs in General Budget Set Uniform prices, Changes in Pecuniary Variables, Comparative Tax Analysis Tips on simplifying UMPs General UMP, Monotone Preferences, Eliminating Boundary Solution(s) Properties and UMP of Cobb-Douglas Utility Model Demand and F1nctions Comparative Statics Feedback? [email protected] of Toronto, STGt of Econ3mics (UMP) Utility Maximization Problem ,1 2 is an arbitrary utility function 1 2 > 0 and exogenously given , , 1 2 .. 1 1+ 2 2, , 1 2 1 2 2 Typically = 1,2 0 1 2 0 1 max , 1 2 .. 1 1 2 2 0, 1 0 2 1,2 Budget Set Sayed Ajaz Hussain, Department of Economics Feedback? [email protected] University of Toronto, STG 4
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