Budget Constraints qStart to Build a Theory of Consumer Choice ...
Budget Constraints qStart to Build a Theory of Consumer Choice ...
Budget Constraints qStart to Build a Theory of Consumer Choice ...
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Microeconomics<br />
Dr. Dmitri M. Medvedovski<br />
Y<br />
(hat)<br />
What does this say about Y? Does more X<br />
make us happier? Does this graph have any<br />
conflict with one <strong>of</strong> the axiom?<br />
X 1<br />
0<br />
X 1<br />
I<br />
X 1<br />
II<br />
X 1<br />
III<br />
X<br />
(right shoes)<br />
<strong>Consumer</strong> choice:<br />
. must be located on the budget constraint.<br />
. Must give consumer the most preferred combinations <strong>of</strong> goods and<br />
services.<br />
Y<br />
MRS= P 1<br />
P 2<br />
means satisfaction ∆X 2<br />
∆X 1<br />
is maximized, given budget constraint P 1<br />
P 2<br />
What does this say about X?<br />
X<br />
Page 7 out <strong>of</strong> 7 Lec. 5
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