Macroeconomics Exam Review 241

Macroeconomics Exam Review 241 - Case 1 > This implies...

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Unformatted text preview: Case 1 > This implies that p x = , the consumer spends all her income. Condition (5.101) implies [ x ] for every with [ x ] = for every for which > This case was analyzed in Example 5.17. Case 2 = 0 This allows the possibility that the consumer does not spend all her income. Substituting = 0 in (5.101) we have [ x ] = 0 for every . At the optimal consumption bundle x , the marginal utility of every good is zero. The consumer is satiated, that is no additional consumption can increase satisfaction. This case was analyzed in Example 5.31. In summary, at the optimal consumption bundle x , either the consumer is satiated ( [ x ] = 0 for every ) or the consumer consumes only those goods whose marginal utility exceeds the threshold [ x ] and adjusts consumption so that the marginal...
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This note was uploaded on 01/16/2012 for the course ECO 2024 taught by Professor Dr.dumond during the Fall '10 term at FSU.

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