Chapter 12 Key Points

Chapter 12 Key Points - Ch.12 By:Group1...

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Ch.12 By: Group 1
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Calculate and graph a budget line  that shows the limits to a  person’s consumption  possibilities…
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Consumption possibilities are  constrained by the budget and  prices. Some combinations of  goods are affordable, and some  are not affordable Budget Line Describes the limits to consumption possibilities Ex: Pg. 292 figure 12.1 Rose has only $100 to spend on her two passions in life:  buying books and attending movies. If all books cost $5.00  and all movies cost $2.50. The graph will show what is  attainable and what is not
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A change in the Budget When Tina’s budget increases , her consumption  possibilities expand, and her budget line shifts  outward an vice versa if her budget decreases Ex: Pg. 293 figure 12.2
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Changes in Prices If the price of one good rises when the prices of  other goods and the budget remain the same,  consumption possibilities shrink Pg. 294 figure 12.3
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This document was uploaded on 11/02/2011 for the course MICRO Microecono at FSU.

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Chapter 12 Key Points - Ch.12 By:Group1...

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