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ECO206Y1 (45)
Lecture

Topic 4 - Choice Choice

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Department
Economics
Course
ECO206Y1
Professor
Loren Brandt
Semester
Fall

Description
Topic 4Choice Lecture 2Sept 23rd Assume x1x2 p1p2 x2 Budget Constraint x1p1x2p2Y Intuition Points on the budget constraint represent choicesthat fully exhaust individuals income Every bundle on the budget constraint is associatedwith an indifference curve and defines a level of utility The individual has to choose the bundle on the constraint that maximized the individuals utility The max is given by a tangencyx1 Math Constrained OptimizationUx1x2 Maxx1x2 st p1x1p2x2YSolve 3 firstorder conditions 123Intuition MU x1 MU left MRS internal marginal valuation x2 right OC external marginal valuation
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