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  • Solution to a Constrained Choice Problem

First-Order Condition

A 'first-order condition' is a necessary condition that a solution to an optimization problem must satisfy. It is termed 'first-order' because it is derived from the first derivatives of the functions involved. This condition helps locate potential optimal points, which are often found on the boundary of a problem's constraint. For example, in a consumer choice problem, the first-order condition can be expressed as MRS = MRT, or, when using the substitution method, it is found by setting the first derivative of the objective function to zero.

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