Budget Constraints qStart to Build a Theory of Consumer Choice ...
Budget Constraints qStart to Build a Theory of Consumer Choice ...
Budget Constraints qStart to Build a Theory of Consumer Choice ...
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Microeconomics<br />
Dr. Dmitri M. Medvedovski<br />
U(X1, X2)<br />
X2<br />
U1<br />
U2<br />
X1<br />
It is impossible for indifference curves <strong>to</strong> cross each other because that<br />
would violate the axiom <strong>of</strong> transitivity. Prove follows.<br />
A<br />
C<br />
B<br />
One way <strong>to</strong> solve it is <strong>to</strong> use Mr. Lagrange<br />
n<br />
1<br />
, X<br />
2,<br />
X<br />
3...<br />
X<br />
n<br />
) + ( M −∑<br />
Pi<br />
X<br />
i<br />
)<br />
i=<br />
1<br />
L = U ( X<br />
λ<br />
Page 3 out <strong>of</strong> 7 Lec. 5
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