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

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Unformatted text preview: Chapter Nine Buying and Selling 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 The list of resource units with which a consumer starts is his endowment . A consumers endowment will be denoted by the vector (omega). Endowments E.g. states that the consumer is endowed with 10 units of good 1 and 2 units of good 2. What is the endowments value? For which consumption bundles may it be exchanged? = = ( , ) ( , ) 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 ( , ) 1 2 p x p x p p 1 1 2 2 1 1 2 2 + = + . { } ( , ) , , . x x p x p x p p x x 1 2 1 1 2 2 1 1 2 2 1 2 0 0 + + Budget Constraints Revisited x 2 x 1 1 2 p x p x p p 1 1 2 2 1 1 2 2 + = + Budget set { } ( , ) , , x x p x p x p p x x 1 2 1 1 2 2 1 1 2 2 1 2 + + Budget Constraints Revisited x 2 x 1 1 2 p x p x p p 1 1 2 2 1 1 2 2 + = + p x p x p p 1 1 2 2 1 1 2 2 ' ' ' ' + = + Budget set Budget Constraints Revisited...
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This note was uploaded on 12/06/2011 for the course BUSINESS MicroEco taught by Professor Luyu during the Spring '11 term at Tsinghua University.

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

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