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 \(x_2^*>0\)