micro-2009-4 - Households Households De.nition Consumption...

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Households Households Consumption Set The consumption set X is the set of consumption bundles which are physically feasible. Ani Guerdjikova ECON 3130 Fall 2009 40 / 246
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Households Example e.g. 24/7. 6 - x 1 x 2 X ¯ x 1 0 Ani Guerdjikova ECON 3130 Fall 2009 41 / 246
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Households The Budget Constraint The Budget Constraint 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 3130 Fall 2009 42 ± 246
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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 0 y p 1 Ani Guerdjikova ECON 3130 Fall 2009 43 / 246
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Households The Budget Constraint Income Changes
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micro-2009-4 - Households Households De.nition Consumption...

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