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Microeconomics Chapter 5 Appendix

# Microeconomics Chapter 5 Appendix - Microeconomics Chapter...

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Microeconomics: Chapter 5 17/10/2007 14:31:00 Appendix Indifference Curve o If you are equally happy with your amounts of A and B your total  benefit is the same with each curve.  However as you move out, you  get more utility o The curves will never cross Budget Constraint o What we can actually afford (negative slope)  Combined: o Find the tangency point (most happy) o Must be some combination along the budget constraint. The Budget Line Changes in the budget line o  in income => shift of the budget line o  in the relative prices of the goods =>   in the slope of the budget  line. Slope of the budget line: The slope is equal to the price ratio The price of the good on the horizontal axis divided by the price of the good  on the vertical axis Slope = - (Px/Py)

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Microeconomics Chapter 5 Appendix - Microeconomics Chapter...

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