Special Utility Functions

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Conditions of Perfect Complements

• Perfect Complements takes the form $u(x_{1},x_{2})=\min[ax_{1},bx_{2}]\$.

• Indifference curve is L-shaped, with the vertex of the L-shape passing through the line $x_{2}={\frac {a}{b}}x_{1}$

• 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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