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  1. Introduction
  2. The consumer
  3. The producer
  4. General and competitive balance pareto optimality
  5. Conclusion

Consider two individuals (call them A and B) which reflect the amount of two goods (X and Y) they consume. Consider that there are only these two properties to simplify the world in which we place ourselves. In general, we can say that two individuals will not consume the same amount of X and Y. Why? First, because they do not necessarily have the same tastes. In short, we see that the demand for a good depends not only on price but also the income and preferences.

What role does the income in the application? In fact, you can buy the two properties as you want, as long as the expenses that it represents does not exceed the income. In other words, income acts as a constraint on the amount of the two goods that will be consumed. As for taste-preferences-are represented by the utility function: when you choose the quantity of each item that will consume, it is done so as to be as satisfied as possible.

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