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Micro - class 5

# Micro - class 5 - easier to work with Monotonicity Graph1...

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Sept 29 nd Question: is there a best bundle? Do we have a means of deciding that? Let’s suppose we had a really fast computer, and the computer was doing comparisons for us, could it determine the best spot for us. Do we have the means to determine the best spot? There are important theorems in mathematics which says that if you have a way of ordering the spots, then you can find the best spot. Start at A and then compare A to all other bundles. See if you can find a bundle that dominates A, if you can’t find another bundle that is preferred to A, then A has to be the best bundle. Suppose B turns out to be a better bundle: then just restart the process at B, but at least then you don’t have to check A again, or any bundles that go with A, cause anything that A is better than, then it is toast. There might be bundles that are just as good as each other. But there has to be a best bundle. It is inconvenient to do it this way! Maybe instead we can add some assumptions that will make the search for the best point

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Unformatted text preview: easier to work with. Monotonicity Graph1: If a construct a new bundle that contains no less of good 2 but a little bit more of good 1, monotonicity says that: that point is better. Graph2: In monotonicity Ba is better than Wa, but we cant conclude where the other points in the other areas stand relative on Ba. Monotonicity is about more, not more one of and less than the other, just more. Graph3: can point A be an optimum for a consumer, If I can find a better bundle than A, if I can go there, and can afford it, I will buy it. This agent is being pushed towards the budget line. Graph4: we talked about some bundles being strictly better and some bundles being weakly better, and then you can like 2 bundles equally. We are going back to this notion of indifference. Graph 5: ?? how are A and H equal? Graph 6: intersecting graphs? Indifference curves never intersect....
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