2-2-09 - economic constraints. There are two separate...

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Microeconomics – Class Notes – 2/2/09 Slope of indifference curve = Marginal Rate of substitution Marginal rate of substitution – how much am I willing to give up of good Y to get another unit of good X o Deals with preferences Slope of Budget constraint = The opportunity cost Slope of budget constraint = how much do I have to give up of good Y to get another unit of good X o Deals with reality .
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#3. From the review sheet The subsidy works in the opposite direction of a tax #1 from the review sheet:
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Optimization – just know the concept Economists believe that people try to make themselves as well off as possible given their
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Unformatted text preview: economic constraints. There are two separate cross-price elasticities for pizza and wine. #2 from review sheet: If he gives you an equation for demand and he asks for elasticities, start with the price elasticities (cross-price, income, or demand): #9 (part C) He wants marginal utility, marginal rate of substitution, . #9 part D Holding everything else constant, if I move the number of units of X ONLY by 1, you can determine the marginal utility (because you are staying on the same indifference curve)...
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2-2-09 - economic constraints. There are two separate...

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