Choicechh5 - Chapter Five Choice Economic Rationality...

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Chapter Five Choice
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Economic Rationality ± Behavioral postulate: The decision maker chooses its most preferred alternative from those available to it. ± The choice set consists of the available choices.
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Rational Constrained Choice: An Example x 1 x 2
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Rational Constrained Choice: An Example x 1 x 2 Utility
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Rational Constrained Choice: An Example Utility x 2 x 1
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Rational Constrained Choice: An Example x 1 x 2 Utility
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Rational Constrained Choice: An Example Utility x 1 x 2
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Rational Constrained Choice: An Example Utility x 1 x 2
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Rational Constrained Choice: An Example Utility x 1 x 2
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Rational Constrained Choice: An Example Utility x 1 x 2
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Rational Constrained Choice: An Example Utility x 1 x 2 Affordable, but not the most preferred affordable bundle.
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Rational Constrained Choice: An Example x 1 x 2 Utility Affordable, but not the most preferred affordable bundle. The most preferred of the affordable bundles.
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Rational Constrained Choice: An Example x 1 x 2 Utility
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Rational Constrained Choice: An Example Utility x 1 x 2
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Rational Constrained Choice: An Example Utility x 1 x 2
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Rational Constrained Choice: An Example Utility x 1 x 2
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Rational Constrained Choice: An Example x 1 x 2
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Rational Constrained Choice: An Example x 1 x 2 Affordable bundles
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Rational Constrained Choice: An Example x 1 x 2 Affordable bundles
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Rational Constrained Choice: An Example x 1 x 2 Affordable bundles More preferred bundles
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Rational Constrained Choice x 1 x 2 x 1 * x 2 *
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Rational Constrained Choice x 1 x 2 x 1 * x 2 * (x 1 *,x 2 *) is the most preferred affordable bundle.
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Rational Constrained Choice ± The most preferred affordable bundle is called the consumer’s ORDINARY DEMAND at the given prices and budget. ± Ordinary demands will be denoted by x 1 *(p 1 ,p 2 ,m) and x 2 *(p 1 ,p 2 ,m).
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Rational Constrained Choice ± When x 1 * > 0 and x 2 * > 0 the demanded bundle is INTERIOR .
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Choicechh5 - Chapter Five Choice Economic Rationality...

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