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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 yintercept
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 (sixpacks 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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This document was uploaded on 03/14/2014.
 Fall '14

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