Flip It Budget Line Notes - \u25cf \u25cf \u25cf \u25cf \u25cf \u25cf \u25cf \u25cf \u25cf \u25cf The budget constraint what you can afford \u25cb To determine your budget constraint

Flip It Budget Line Notes - u25cf u25cf u25cf u25cf...

This preview shows page 1 - 2 out of 2 pages.

The budget constraint - what you can afford To determine your budget constraint, you need to know the prices of what you want to buy and the total amount of money budgeted for the items Ex: One steak costs $4, bananas cost $1 per pound, and you have a total of $16 to spend on both goods. So you could either use your whole budget to buy steaks which would get you 4 steaks, or you could use the whole budget to buy bananas which would get you 16 pounds of bananas. Or you can buy a combo of both foods The choices can be represented on a graph, with the quantity of each good measured on the axes For example, with a budget of $16, the intercept along the steak axis shows the max number of steaks you can afford, while the other intercept shows the max number of bananas Drawing a line between both intercepts shows the possible combination of steaks and bananas you can buy with your budget → the line is called the budget line

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture