RATIONAL CONSUMER CHOICE. Chapter Outline. The Opportunity Set or Budget Constraint Consumer Preferences The Best Feasible Bundle The Utility Function Approach to Consumer Choice Cardinal Versus Ordinal Utility Using Calculus to Maximize Utility: The Method of Lagrangian Multipliers.
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PSS + PFF = M (3.1)
B = budget constraint
U = U(X,Y)
Maximize £ = U(X,Y) - (PXX + PYY = M)
4X + 2Y = 40
Y = 20 - 2X