Chapter Two Budgetary and other Constraints on choice
Chapter Two Budgetary and Other Constraints on Choice
Contents Describe budget constraint -Algebra Graph Describe changes in budget constraint Government programs and budget constraints Non-linear budget lines
Contents Describe budget constraint –Algebra –Graph Describe changes in budget constraint Government programs and budget constraints Non-linear budget lines
Consumption Choice Sets A consumption choice set is the collection of all consumption choices availlable to the consumer What constrains consumption choice? Budgetary, time and other resource limitations
Consumption Choice Sets A consumption choice set is the collection of all consumption choices available to the consumer. What constrains consumption choice? –Budgetary, time and other resource limitations
Budget Constraints A consumption bundle containing x, units of commodity 1, x2 units of commodity 2 and so on up to xn units of commodity n is denoted by the vector ( x, gn Commodity prices are p1p2,……,pn
Budget Constraints A consumption bundle containing x1 units of commodity 1, x2 units of commodity 2 and so on up to xn units of commodity n is denoted by the vector (x1 , x2 , … , xn ). Commodity prices are p1 , p2 , … , pn
Budget Constraints Q: When is a consumption bundle 15 ■■ xn affordable at given prices p1,…,pn?
Budget Constraints Q: When is a consumption bundle (x1 , … , xn ) affordable at given prices p1 , … , pn?