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Unformatted text preview: have maximized her utility. We can't pick a curve any further out, such as the third indifference curve, since she can't afford to buy more than $100 worth of wine and glasses. Obviously, budget constraints change with changes in income or price. For instance, if Tina now has $125 instead of $100, her new budget constraint will be a parallel shift out from her original budget constraint. The yellow shaded region represents the increase in possible purchases she can make: A Shift in Tina's Budget Constraint On the other hand, if Tina still has only $100, but the price of wine changes from $20 a bottle to $10 a bottle, her budget constraint will pivot to reflect this change: A Pivot in Tina's Budget Constraint...
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This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.
- Fall '08