The two goods model

Summary

The two goods model

• Two goods: good 1 and good 2
• A single point in time
• A single individual
• $x_1$ : consumption of good 1
• $x_2$ : consumption of good 2
• Infinitely divisible, $x_1≥0$ , $x_2≥0$
• Price of good 1: $p_1>0$
• Price of good 2: $p_2>0$
• Prices are fixed
• Consumer has income: $m>0$

Consumption bundle

• Consumption bundle: $\left( x_1,x_2 \right)$ as a point in a Cartesian coordinate system