Budget Constraints
3 years ago
Microeconomics
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.
PFF + PCC = I
*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