micro-fall2007-4 - Households Households...

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Unformatted text preview: Households Households De&nition Consumption Set The consumption set X is the set of consumption bundles which are physically feasible. Ani Guerdjikova ECON 313 Fall 2007 44 / 59 Households Example Let good 1 be &leisure&. There is a maximal upper bound on &leisure&, e.g. 24/7. 6- x 1 x 2 X x 1 Ani Guerdjikova ECON 313 Fall 2007 45 / 59 Households The Budget Constraint The Budget Constraint De&nition Budget Set The budget set is the set of all consumption bundles, which a consumer can a/ord at given prices and for a given income level of wealth. Ani Guerdjikova ECON 313 Fall 2007 46 59 Households The Budget Constraint Example Two goods Income: y x 1 quantity of good 1 p 1 price of good 1 x 2 quantity of good 2 p 2 price of good 2 Budget set: ( x 1 ; x 2 ) s.t. p 1 x 1 + p 2 x 2 & y 6- Z Z Z Z Z Z Z Z Z Z Z Z Z x 1 x 2 y p 2 p 1 p 2 p 1 x 1 + p 2 x 2 = y p 1 x 1 + p 2 x 2 & y y p 1 Ani Guerdjikova ECON 313 Fall 2007 47 / 59 Households The Budget Constraint Income Changes 6- Z Z Z Z Z Z...
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micro-fall2007-4 - Households Households...

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