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Unformatted text preview: What we call chaos is just patterns we havent recognized. What we call random is just patterns we cant decipher. What we cant understand we call nonsense. What we cant read we call gibberish. Chuck Palahniuk ECON 410 Constrained Optimization (Mathematical) 1 2 1 1 2 2 ( , ) ( ) U x x I p x p x = + L HW2 LongForm on Large Table 2 Class 9  Constrained Optimization (Mathematical) 3 Class 9  Constrained Optimization (Mathematical) 4 Class 9  Constrained Optimization (Mathematical) 5 Class 9  Constrained Optimization (Mathematical) Constrained Optimization 1. If preferences are monotonic, then my optimal point will be on the Budget Line or else monotonicity is violated. 2. If preferences are rational, convex, and monotonic, then if I am consuming both goods, my optimal point will be on the Budget Line and will be at a point such that the slope of my indifference curve is identical to the slope of my Budget Line or a kink in the Budget Line or Indifference Curve 6 Class 9  Constrained Optimization (Mathematical) Constrained Optimization 1. If preferences are monotonic, then my optimal point will be on the Budget Line or else monotonicity is violated. 2. If preferences are rational, convex, and monotonic, then if I am consuming both goods, my optimal point will be on the Budget Line and will be at a point such that the slope of my indifference curve is identical to the slope of my Budget Line or a kink in the Budget Line or Indifference Curve 7 Class 9  Constrained Optimization (Mathematical) the slope of my indifference curve is identical to the slope of my Budget Line GroupClicker Question (P): What is another name for the slope of an indifference curve assuming x1 is on the xaxis and x2 is on the yaxis? 1 2 3 4 68% 14% 0% 18% 1. MRSx1,x2 2. MRTx1,x2 3. Ux1 4. All of the above GroupClicker Question (P): What is another name for the slope of the budget line assuming x1 is on the xaxis and x2 is on the yaxis? 1 2 3 4 5% 0% 3% 92% 1. MRSx1,x2 2. MRTx1,x2 3. Ux1 4. All of the above 10 Class 9  Constrained Optimization (Mathematical) the slope of my indifference curve is identical to the slope of my Budget Line MRSx1,x2=MRTx1,x2 11 Class 9  Constrained Optimization (Mathematical) MRSx1,x2=MRTx1,x2 T o o p t i m i z e , t h e r a t e a t w h i c h I a m w i l l i n g t o t r a d e t h e g o o d s m u s t e q u a l t h e r a t e a t w h i c h t h e m a r k e t d i c t a t e s I t r a d e t h e m . GroupClicker Question (P): Assume preferences are rational and monotonic. Assume at my current bundle, I would be willing to trade 1 unit of Good 1 for 2 units of Good 2. Assume the market prices are such that I could sell 1 unit of Good 1 for 3 units of Good 2. How could I end up better off?...
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This note was uploaded on 01/05/2012 for the course ECON 410 taught by Professor Codrin during the Fall '07 term at UNC.
 Fall '07
 Codrin

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