Economic Theory of Choice - Certainty

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I. Introduction
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Economic Theory of Choice - Certainty

• 1. Feasible Opportunity Set
• 2. Criteria for Choice
• 3. Optimum Choice
• 4. Equilibrium as Aggregate
• Assume 10,000 income in each of
• two periods
• Transfer at 5
• Then Die

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Opportunity Set - What are the possibilities?

• Extremes
• My mother-in-law spend as much as you can now
• Rational world can only borrow what can pay
• back
• A (.05)A 10,000
• A 19,524
• Scrooge - save as much as you can
• 10,000 10,000 (1.05) 20,500
• All possibilities on bounded straight line

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