Optimal choice

Summary

Optimal choice

• Given: Two goods model with totally ordered weak preferences
• $(x_1^*,x_2^*)$ is called the optimal choice , optimal bundle or the demand bundle if

$$(x_1^*,x_2^*)≽\left( x_1,x_2 \right)$$

• for all bundles $\left( x_1,x_2 \right)$ in the budget set

• An optimal choice $(x_1^*,x_2^*)$ is said to be :
• A Boundary solution if $x_1^*=0$ or $x_2^*=0$
• An Interior solution if $x_1^*>0$ and $x_2^*>0$