nicholson微观经济理论（答案+PPT+习题库）-ch04.pptVIP

Chapter 4 UTILITY MAXIMIZATION AND CHOICE Complaints about the Economic Approach No real individuals make the kinds of “lightning calculations” required for utility maximization The utility-maximization model predicts many aspects of behavior Thus, economists assume that people behave as if they made such calculations Complaints about the Economic Approach The economic model of choice is extremely selfish because no one has solely self-centered goals Nothing in the utility-maximization model prevents individuals from deriving satisfaction from “doing good” Optimization Principle To maximize utility, given a fixed amount of income to spend, an individual will buy the goods and services: that exhaust his or her total income for which the psychic rate of trade-off between any goods (the MRS) is equal to the rate at which goods can be traded for one another in the marketplace A Numerical Illustration Assume that the individual’s MRS = 1 willing to trade one unit of x for one unit of y Suppose the price of x = $2 and the price of y = $1 The individual can be made better off trade 1 unit of x for 2 units of y in the marketplace The Budget Constraint Assume that an individual has I dollars to allocate between good x and good y pxx + pyy ? I First-Order Conditions for a Maximum We can add the individual’s utility map to show the utility-maximization process First-Order Conditions for a Maximum Utility is maximized where the indifference curve is tangent to the budget constraint Second-Order Conditions for a Maximum The tangency rule is only necessary but not sufficient unless we assume that MRS is diminishing if MRS is diminishing, then indifference curves are strictly convex If MRS is not diminishing, then we must check second-order conditions to ensure that we are at a maximum Second-Order Conditions for a Maximum The tangency rule is only a necessary condition we need MRS to be diminishing Corner Solutions In some situations, individuals’ preferences may be such that