Special Utility Functions

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Conditions of Perfect Complements

  • Perfect Complements takes the form .
  • Indifference curve is L-shaped, with the vertex of the L-shape passing through the line
  • Interpretation is left shoe-right shoe
  • When doing optimization problems, we always equate the two components in the min{. , .}. That is ax1 = bx2. When ax1 = bx2, we are not using any extra resources, and the utility (or production function) is u = ax1 = bx2.

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