1 year ago

Budget constraints – Constraints that consumers face as a result of limited incomes.


Budget line – All combinations of goods for which the total amount of money spent is equal to income.



*We can see how much of y-axis quantity must be given up to consume more of x- axis quantity, by using:

QY = (I/PY) – (PX/PY)QX

A change in the income, shift the whole budget line to the right or left.

A change in the price, rotates the budget line depending on which price changes.

Bijay Satyal
Nov 24, 2021
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