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9-2-10

# 9-2-10 - 9210 Testtwoweeksfromnow o , S1 o o o o

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9-2-10 Test two weeks from now o Some short answer questions and problems, maybe some MC but never before Last class - discussed framework to incorporate preferences Utility fxns easier to solve problems and we will incorporate policies using utility fxns S1: o Didn’t talk yet about what is FEASIBLE o What they’d like o What can afford o What actually purchase S2 o Linear prices For every unit you purchase, the price of that unit is constant o Look at two goods food and clothing with \$2 and \$3 respectively and an income  of \$30 (available money) o Put what is affordable on the same graph with the preferences o once you get two points on the line you can characterize the entire line and get  all the point S3 o Budget graph All clothing is 10 units and no food – was simply 30/3 All on food and none on clothing is 15 units of food Slope is -2/3

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Reached this by Blue/shaded area is anything that is affordable and feasible S4 o Bundle C is not affordable and therefore it is outside the shaded region (not actually shaded this time) S5 o Total spending can’t be more than income o Budget set was the blue/shaded triangle Affordable bundles o Budget line Collection of bundle where consumer spends all their income S6 o X represents the number of the goods o Sum of P X cant exceed income (I) S7 o Y intercept means Total income divided by I (income) o slope now in slope intercept form S8 o Why doesn’t the line shift? Why is it rotating instead?
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9-2-10 - 9210 Testtwoweeksfromnow o , S1 o o o o

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