Corner Solution

… a core term used in Economic Analysis and Atlas102

Definition

Dictionary Central (reference below) defines a corner solution as a choice outcome that entails the individual being on a constraint such as a budget constraint at the point at which the constraint touches one of the axes.

Dictionary Central goes on to say:

“It arises from the inability to purchase negative quantities of a good or service or from the absence of negative prices. It is a limiting case in which the usual maximizing conditions, like marginal value being equal to price, cannot apply. The indifference curve is not tangential to the budget constraint. Similar results can be obtained in labour supply decisions and production functions.”

Atlas topic, subject, and course

Consumer Theory and Elasticity of Demand and Supply (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Source

DictionaryCentral, Budget Line, at http://www.dictionarycentral.com/definition/corner-solution.html, accessed 12 May 2016.

Page created by: Ian Clark, last modified 12 May 2016.