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Tsinghua Micro Ch9 021011

# Tsinghua Micro Ch9 021011 - Chapter Nine Buying and Selling...

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What Are We Doing in this Chapter? We expand our basic consumer choice framework to include the possibility that consumers can sell something to generate income. Again, in terms of theoretical framework, nothing is new.
Endowments 禀禀 The list of resource units with which a consumer starts is his endowment . A consumer’s endowment will be denoted by the vector (omega). ϖ

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Endowments E.g. states that the consumer is endowed with 10 units of good 1 and 2 units of good 2. What is the endowment’s value? For which consumption bundles may it be exchanged? ϖ ϖ ϖ = = ( , ) ( , ) 1 2 10 2
Budget Constraints Revisited So, given p 1 and p 2 , the budget constraint for a consumer with an endowment is The budget set is ( , ) ϖ ϖ 1 2 p x p x p p 1 1 2 2 1 1 2 2 + = + ϖ ϖ . { } ( , ) , , . x x p x p x p p x x 1 2 1 1 2 2 1 1 2 2 1 2 0 0 + + ϖ ϖ

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Budget Constraints Revisited x 2 x 1 ϖ 1 ϖ 2 p x p x p p 1 1 2 2 1 1 2 2 + = + ϖ ϖ Budget set { } ( , ) , , x x p x p x p p x x 1 2 1 1 2 2 1 1 2 2 1 2 0 0 + + ϖ ϖ
Budget Constraints Revisited x 2 x 1 ϖ 1 ϖ 2 p x p x p p 1 1 2 2 1 1 2 2 + = + ϖ ϖ p x p x p p 1 1 2 2 1 1 2 2 ' ' ' ' + = + ϖ ϖ Budget set

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Budget Constraints Revisited x 2 x 1 ϖ 1 ϖ 2 p x p x p p 1 1 2 2 1 1 2 2 + = + ϖ ϖ The endowment point is always on the budget constraint.
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Tsinghua Micro Ch9 021011 - Chapter Nine Buying and Selling...

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