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choice.5 - Econ 100A Choice(Chapter 5 Thomas G Koch Winter...

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Econ 100A: Choice (Chapter 5) Thomas G. Koch Winter 2009 Thomas G. Koch Choice (5) 1(37)
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Clickers Turn on your clicker Hit a button Thomas G. Koch Choice (5) 2(37)
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Not just any choice Trying to find optimal choice What bundle makes you happiest . . . among those you can afford. Thomas G. Koch Choice (5) 3(37)
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Not just any bundle Bundle that puts you on the highest indifference curve that is still affordable Thomas G. Koch Choice (5) 4(37)
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The Consumer Optimization Problem max x 1 , x 2 u ( x 1 , x 2 ) subject to m p 1 · x 1 + p 2 · x 2 Thomas G. Koch Choice (5) 5(37)
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With well-behaved preferences Thomas G. Koch Choice (5) 6(37)
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As it is drawn . . . Optimal choice: MRS = Relative price Why relative price matters more Thomas G. Koch Choice (5) 7(37)
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The intuitive appeal Sets marginal cost . . . equal to marginal benefit Thomas G. Koch Choice (5) 8(37)
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How to solve consumer optimization If an interior bundle, and preferences are well-behaved . . .
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