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lec4 - Utility Maximization A Special Case Can this person...

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2010-03-10 1 Econ201 Consumer Behavior More Cases Utility Maximization: A Special Case Can this person increase utility? Videos 10 Corner Solution MRS > P /P P y =\$2 U 1 U 0 Ice Cream 20 MRS > P x /P y P x =\$1 Income=\$20 1.5 1 0 U 2 D Equilibrium is at point D Why are these preferences impossible? Videos 10 P y =\$2 U 0 A Ruled out by transitivity (and diminishing marginal rate of substitution): Indifference curves cannot intersect Ice Cream 20 U 2 P x =\$1 Income=\$20 1. 5 1 0 D Corner Solutions Are a Special Case A corner solution represents an optimum bundle when a consumer desires to consume less of a good than is feasible than is feasible. At a corner solution, the indifference curve is not tangent to the budget constraint. Another Example Can this person increase utility? Videos U 2 Corner Solution MRS < P x /P y 2 0. 7 P y =\$2 10 A Equilibrium is at point A Ice Cream P x =\$1 Income=\$20 20 0 Is this the same example? Can this person increase utility?

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lec4 - Utility Maximization A Special Case Can this person...

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