ECN 104 Lecture Notes - Budget Constraint, Indifference Curve, Opportunity Cost
22 Oct 2012
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Buying more of one good leaves less income to buy other goods. Working more hours means more income and more consumption, but less leisure time. 40 fish and 300 mangos: the slope of budget constraint consumer can afford, rise = -200 mangos, run = +50 fish, slope = -4, the slope of the budget constraint equals. Hurley must give up 4 mangos to get one fish. The rate at which hurley can trade mangos for fish. The opportunity cost of fish in terms of mangos. The relative price of fish: price of fish / price of mangos, the income and substitution effects, a fall in the price of fish has two effects on hurley"s optimal consumption of both goods. Income effect: a fall in pf boosts the purchasing power of. Hurley"s income, allows him to buy more mangos and more fish.
