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Ch 9 Indifference curves-shortversion

# real income real income is the maximum quantity of a

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Unformatted text preview: me is the maximum quantity of a good that a household can afford to buy. Lisa’s real income (in terms of pop) is: income y \$30 = = = 10 price of pop Pp \$3 y-intercept -intercept on budget line line Relative Price Relative A relative price is the price of one good divided by the price of another good. The relative price of movies to pop is: price of movies \$6 = =2 price of pop \$3 Recall the budget Recall equation equation opportunity cost of movies Qp = 10 − 2Qm relative price Pop (six-packs per month) A Change in Price Change 10 Price of a y 30 6 = =5 movie is... Q p = 10 − Qm = 10 − 2Qm p 6 m 3 a 12 y 30 Qp = 10 − Qm = 10 − 4Qm = = 2.5 pm 12 3 8 6 3...
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