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Different preferences will lead to different demand

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Unformatted text preview: one where the MRS is equal to this rate of exchange: MRS = −p1/p2 ??? 5.2. Consumer demand The optimal choice of goods 1 and 2 at some set of prices and income is called the consumer’s demanded bundle. In general, when prices and income change, the consumer’s optimal choice will change à༎ The demand function x1(p1, p2,m) and x2(p1, p2,m): function that relates the optimal choice—the quantities demanded—to the different values of prices and incomes. For each different set of prices and income, there will be a different combination of goods that is the optimal choice of the consumer. Different preferences will lead to different...
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