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Unformatted text preview: 2010-03-151Econ201Consumer BehaviorNon-linear Budget ConstraintApplying Model of Consumer Behavior(chapter 3)•Working with non-linear budget constraints•Understanding how consumer demand is affected by a change inpricesSlide 5-2is affected by a change in prices•Understanding how consumer demand is affected by a change in incomeNew Choices Among Calling PlansPlan B: $10/month + 10 cents/minuteIncome=$100/month, Price AOG =$1AllOtherGoods/month100Now Plan C is offered: $15/month, 100 minutes free,+ 10 cents/minute for additional minutes90Minutes of phone calls/month9090085100950A non-linear budget constraintThe budget constraints have same slope over downward sloping portions. Why?Non-Linear Budget Constraints•Consumption of a fixed number of units may be required (or is possible, e.g., “free minutes”)Each unit of good may have a different•Each unit of good may have a different price (my water bill)Linear Budget Constraint(Cash Transfers)AOG5060Income=$50, price of food = $1...
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