penn101_09s1 - Budget Constraint Prefereces Econ 101...

Info icon This preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Budget Constraint Prefereces Econ 101: Intermediate Microeconomics Consumer Theory I: How Does a Consumer Choose? Part 1 Jing Li Department of Economics University of Pennsylvania January 19, 2009 Jing Li Intermediate Microeconomics
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Budget Constraint Prefereces Budget Set Changes in the Budget Constraint How does a consumer choose? Choose what one likes the best given what one can afford. Purposeful behavior: get the bundle one prefers the most Scarce resources: affordability The math: Maximizes preferences/utilities; Budget constraint. Jing Li Intermediate Microeconomics
Image of page 2
Budget Constraint Prefereces Budget Set Changes in the Budget Constraint How does a consumer choose? Choose what one likes the best given what one can afford. Purposeful behavior: get the bundle one prefers the most Scarce resources: affordability The math: Maximizes preferences/utilities; Budget constraint. Jing Li Intermediate Microeconomics
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Budget Constraint Prefereces Budget Set Changes in the Budget Constraint Budget set in a 2-good economy with money Two goods: 1 and 2 the amount of goods: x 1 , x 2 Key elements: Money: m Price for good 1: p 1 Price for good 2: p 2 Budget set: what the consumer can afford. The set of ( x 1 , x 2 ) that satisfies: p 1 x 1 |{z} money spent on good 1 + p 2 x 2 |{z} money spent on good 2 m Budget line: what the consumer can buy by spending all the money. The set of ( x 1 , x 2 ) that satisfies: p 1 x 1 + p 2 x 2 = m Jing Li Intermediate Microeconomics
Image of page 4
Budget Constraint Prefereces Budget Set Changes in the Budget Constraint Budget set in a 2-good economy with money Two goods: 1 and 2 the amount of goods: x 1 , x 2 Key elements: Money: m Price for good 1: p 1 Price for good 2: p 2 Budget set: what the consumer can afford. The set of ( x 1 , x 2 ) that satisfies: p 1 x 1 |{z} money spent on good 1 + p 2 x 2 |{z} money spent on good 2 m Budget line: what the consumer can buy by spending all the money. The set of ( x 1 , x 2 ) that satisfies: p 1 x 1 + p 2 x 2 = m Jing Li Intermediate Microeconomics
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Budget Constraint Prefereces Budget Set Changes in the Budget Constraint Budget set in a 2-good economy with money Two goods: 1 and 2 the amount of goods: x 1 , x 2 Key elements: Money: m Price for good 1: p 1 Price for good 2: p 2 Budget set: what the consumer can afford. The set of ( x 1 , x 2 ) that satisfies: p 1 x 1 |{z} money spent on good 1 + p 2 x 2 |{z} money spent on good 2 m Budget line: what the consumer can buy by spending all the money. The set of ( x 1 , x 2 ) that satisfies: p 1 x 1 + p 2 x 2 = m Jing Li Intermediate Microeconomics
Image of page 6
Budget Constraint Prefereces Budget Set Changes in the Budget Constraint Budget set in a 2-good economy with money Two goods: 1 and 2 the amount of goods: x 1 , x 2 Key elements: Money: m Price for good 1: p 1 Price for good 2: p 2 Budget set: what the consumer can afford.
Image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern