The Theory of Consumer Choice (Optimization (Income and Substitution…
The Theory of Consumer Choice
Interest rate and Saving
Wages and Labor supply
Deriving the Demand curve
Income and Substitution effects
Tiny in complement goods
Huge in substitute goods
The effect of a price change
Rotate the budget constraint
The effect of an increase in Income
The Consumer's optimal choices
The same slope at the optimum
MRS = Relative price at the optimum
Two extreme examples
Marginal rate of substitution (MRS)
Indifference curves are bowed inward.
Indifference curves do not cross.
Indifference curves are downward sloping.
Higher indifference curves are preferred to lower ones.
The Budget Constraint
The slope of budget constraint
Vietnam-Netherlands Programme - 2017
Do Huu Luat