CB-Utility approach

# Or g2ipg2 pg1 pg2 g1 lets say pg1100 and pg250 and

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or, G2=I/Pg2 – (Pg1 /Pg2 )G1 Lets say Pg1=100 and Pg2=50  and I=5000          Budget constraint Combination G1 G2 I I 0 100 5000 II 10 80 5000 II 30 40 5000 IV 40 20 5000 V 50 0 5000

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Budget line G1 G 2 100 50 80 40 10 30 x1 x2 Slope= Δ G2/ Δ G1= -40/20=-2=-Pg1 /Pg2 Budget line: 100X+50Y=5000
Budget line: Change in Income G1 G2 100 50 60 120 Budget line: 100X+50Y=5000 Budget line: 100G1+50G2=6000

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Budget line: Change in Price G1 G 2 100 50 Budget line:  100G1+50G2=5000 Budget line: 50G1+50G2=5000 100 25 Budget line:  200G1+50G2=5000
Consumer choice G 1 G 2 100 50 IC3=u3 IC2=u2 IC1=u1 x1 x2 At x1, slope of the budget line=slope of the indifference  curve: MRS=Pg1/Pg2
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• Spring '12
• AbhinavDhar
• Harshad number, Mihir

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