Class6

# Class6 - Econ 100 Class 6-7 Budget Sets and Constrained...

This preview shows pages 1–8. Sign up to view the full content.

Econ 100 1 Winter 2012: Professor Bushnell Econ 100 Class 6-7: Budget Sets and Constrained Choice 1

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

View Full Document
Econ 100 2 Winter 2012: Professor Bushnell Budget Constraint budget line (or budget constraint ) - the bundles of goods that can be bought if the entire budget is spent on those goods at given prices. opportunity set - all the bundles a consumer can buy, including all the bundles inside the budget constraint and on the budget constraint
Econ 100 3 Winter 2012: Professor Bushnell Budget Constraint • If Lisa spends all her budget, Y , on pizza and burritos, then p B B + p Z Z = Y – where p B B is the amount she spends on burritos and p Z Z is the amount she spends on pizzas. – This equation is her budget constraint. • It shows that her expenditures on burritos and pizza use up her entire budget.

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

View Full Document
Econ 100 4 Winter 2012: Professor Bushnell Budget Constraint (cont). • How many burritos can Lisa buy? – To answer solve budget constraint for B (quantity of burritos): P B B + P Z Z = Y P B B = Y P Z Z B = Y P Z Z P B
Econ 100 5 Winter 2012: Professor Bushnell Budget Constraint (cont). • From previous slide we have: – If p Z = \$1, p B = \$2, and Y = \$50, then: B = \$50 (\$1 × Z ) \$2 = 25 0.5 Z

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

View Full Document
Econ 100 6 Winter 2012: Professor Bushnell Allocations of a \$50 Budget Between Burritos and Pizza
Econ 100 7

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 22

Class6 - Econ 100 Class 6-7 Budget Sets and Constrained...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online