中级微观经济学_Ch5.pptVIP

Chapter 5Choice Structure of Chapter 5 5.1 The optimal choice of consumers 5.1.1 Interior solution（内解） 5.1.2 Corner solution（角解） 5.1.3 “Kinky” solution（拐点解） 5.2 Consumer’s demand function 5.3 Application of consumer theory: Choosing taxes 5.1 The Optimal Choice of Consumers Consumer’s problem: maximizing utility subject to the budget constraint (Utility maximization problem). The Optimal Choice Properties of the Optimal Choice The optimal choice: (1) Must be on the budget line, why? (2) Must be on the highest indifference curve that touches the budget line. 5.1.1. Interior Solutions Interior solutions: If all xi* 0, xi* are interior solutions. In the case of two goods, the optimal choice involves consuming some of both goods, i.e., x1* 0 and x2* 0. Two equilibrium conditions for interior solutions, (x1*,x2*) : Budget condition Tangent condition Condition 1: the Budget Is Exhausted Condition 2: Tangent Condition Equal Marginal Principle MU1/P1 or MU2/P2 : Marginal utiltiy per dollar of expenditure. Equal marginal principle: Utility is maximized when the consumer has equalized the marginal utility per dollar spent on all goods. Why is this an equilibrium? Disequilibrium Point Solving for Interior Solution (method 1) (x1*,x2*) satisfies two conditions: (1) Budget constraint: p1x1* + p2x2* = m (2) Tangency: MU1/MU2= P1/P2 Solving these conditions simultaneously you can get the interior solutions. Solving for Interior Solution (method 2) The conditions may be obtained by using the Lagrangian multiplier method, i.e., constrained optimization in calculus. How to do it? see supplement. 5.1.2 Corner Solutions If some of the xi* = 0, then we say there are corner solutions. In the case of two goods, if either x1* = 0 or x2* = 0, then the ordinary demand (x1*,x2*) is at a corner solution (角解). 5.1.3 ‘Kinky’ Solutions: Perfect Complements Perfect Complements Equilibrium Conditions The optimal choice, (x1*,x2*) satisfies (1) p1x1* + p2x2* = m; (2) x2* = ax