class4 Optimal Choice

class4 Optimal Choice - Class 4 Optimal Choice What we did...

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Class 4 Optimal Choice
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What we did last time iscussion: ± Discussion: ± When is “Demand = Supply” a good Assumption? he Cell- hone Example ± The Cell Phone Example ± Preferences: ± Rational and Normal Consumer Preferences ± Representing Preferences by ± Indifference Curves ± Utility
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Math Review 2: Due Tuesday / Wednesday
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Problem Set 4: Due Wednesday/Thursday
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Outline ptimal Choice ± Optimal Choice ± Budget Set raphical Solution ± Graphical Solution ± The Mathematics of Optimal Choice ± Intuition: Walking up the Hill ± The Math ± Finding the Optimal Choice
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Outline ptimal Choice ± Optimal Choice ± Budget Set raphical Solution ± Graphical Solution ± The Mathematics of Optimal Choice ± Intuition: Walking up the Hill ± The Math ± Finding the Optimal Choice
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Optimal Choice: Budget Constraint q Expenditure X(q 1 ,q 2 ) = p 1 q 1 +p 2 q 2 2 Budget Constraint: The Function q 2 (q 1 ) which is implicitly defined by X(q 1 ,q 2 (q 1 )) = Y q 1 Marginal Rate of Transformation (MRT): MRT (p 1 , p 2 )= - p 1 / p 2 Marginal Rate of Substitution (MRS): MRS (p 1 , p 2 )= - U 1 / U 2
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Optimal Choice: Graphical Solution q Expenditure X(q 1 ,q 2 ) = p 1 q 1 +p 2 q 2 2 Budget Constraint: The Function q 2 (q 1 ) which is implicitly defined by
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This note was uploaded on 12/10/2011 for the course ECON 401 taught by Professor Burbidge,john during the Winter '08 term at Waterloo.

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class4 Optimal Choice - Class 4 Optimal Choice What we did...

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