Summary

1. The optimal choice of the consumer is that bundle in the consumer's budget set that lies on the highest indifference curve.

2. Typically the optimal bundle will be characterized by the condition that the slope of the indifference curve (the MRS) will equal the slope of the budget line.

3. If we observe several consumption choices it may be possible to estimate a utility function that would generate that sort of choice behavior. Such a utility function can be used to predict future choices and to estimate the utility to consumers of new economic policies.

4. If everyone faces the same prices for the two goods, then everyone will have the same marginal rate of substitution, and will thus be willing to trade off the two goods in the same way.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

Get My Free Ebook


Post a comment