This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: ject to a budget constraint. Reconciliation of classical and modern optimality conditions (when n = 2): Δ U ( X ) = MU 1 ( X ) · Δ X 1 + MU 2 ( X ) · Δ X 2 . Along an indi f erence curve, Δ U ( X ) = 0, so that MU 1 ( X ) MU 2 ( X ) =Δ X 2 Δ X 1 = MRS 12 ( X ) . In general, MU i ( X ) MU j ( X ) = MRS ij ( X ) for all i, j. So, the modern optimization condition, MRS ij ( * X ) = p i /p j for all i, j, can be written as MU i ( * X ) MU j ( * X ) = p i p j for all i, j ; or MU i ( * X ) P i = MU j ( * X ) P j for all i, j Exception : “corner solutions.”...
View
Full
Document
This note was uploaded on 10/05/2010 for the course ECON 104A taught by Professor Thomas during the Spring '10 term at UC Riverside.
 Spring '10
 THOMAS
 Utility

Click to edit the document details