中级微观课件·范里安版第5章讲义幻灯片.pptVIP

Income vs. Quantity Tax Proposition: (x1*, x2*) is affordable under income tax Equivalent to: prove that (x1*, x2*) satisfies budget constraint under income tax. Or, budget constraint holds at point (x1*, x2*). p1x1* + p2x2*= m- tx1* Which is true according to (5.2). It is not an optimal choice because prices are different. Conclusion: The optimal choice must be more preferred to (x1*, x2*) Rational Constrained Choice But what if x1* = 0? Or if x2* = 0? If either x1* = 0 or x2* = 0 then the ordinary demand (x1*,x2*) is at a corner solution to the problem of maximizing utility subject to a budget constraint. Examples of Corner Solutions -- the Perfect Substitutes Case x1 x2 MRS = -1 Examples of Corner Solutions -- the Perfect Substitutes Case x1 x2 MRS = -1 Slope = -p1/p2 with p1 p2. Examples of Corner Solutions -- the Perfect Substitutes Case x1 x2 MRS = -1 Slope = -p1/p2 with p1 p2. Examples of Corner Solutions -- the Perfect Substitutes Case x1 x2 MRS = -1 Slope = -p1/p2 with p1 p2. Examples of Corner Solutions -- the Perfect Substitutes Case x1 x2 MRS = -1 Slope = -p1/p2 with p1 p2. Examples of Corner Solutions -- the Perfect Substitutes Case So when U(x1,x2) = x1 + x2, the mostpreferred affordable bundle is (x1*,x2*)where and if p1 p2 if p1 p2. Examples of Corner Solutions -- the Perfect Substitutes Case x1 x2 MRS = -1 Slope = -p1/p2 with p1 = p2. Examples of Corner Solutions -- the Perfect Substitutes Case x1 x2 All the bundles in the constraint are equally the most preferred affordable when p1 = p2. Examples of Corner Solutions -- the Non-Convex Preferences Case x1 x2 Better Examples of Corner Solutions -- the Non-Convex Preferences Case x1 x2 Examples of Corner Solutions -- the Non-Convex Preferences Case x1 x2 Which is the most preferredaffordable bundle? Examples of Corner Solutions -- the Non-Convex Preferences Case x1 x2 The most preferredaffordable bundle Examples of Corner Solutions -- the Non-Convex Preferences Case x1 x2 Th