2- Budgets - Choice Sets with 3 Goods The introduction of...

Info icon This preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
8/16/11 Choice Sets with 3 Goods The introduction of socks then adds a third dimension – because bundles of goods now consist of three numbers: one for pants, one for shirts and one for socks. And if we suppose that the price of socks is $5, we can buy at most 40 socks (if we buy nothing else). That gives us point C on the socks axis. With our income of $200 a $20 price for pants, and a $10 price for shirts, we can buy at most 10 pants (point A ) and at most 20 shirts (point B ).
Image of page 1

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

View Full Document Right Arrow Icon
8/16/11 Choice Sets with 3 Goods Connecting A and B , we get our previous budget constraint when there was no option to buy socks.
Image of page 2
8/16/11 Choice Sets with 3 Goods We similarly get the 2- dimensional budget constraint assuming there are no pants when we connect B and C . This gives all the bundles of shirts and socks that exhaust our $200 exogenous income.
Image of page 3

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

View Full Document Right Arrow Icon
8/16/11 Choice Sets with 3 Goods And, when we connect A and C , we get the 2- dimensional budget constraint assuming there are no shirts and all we are choosing is bundles of pants and socks.
Image of page 4
8/16/11 Choice Sets with 3 Goods When we then fill in the plane that connects the three 2- dimensional budget
Image of page 5

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

View Full Document Right Arrow Icon
Image of page 6
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