Class Notes (837,999)
Canada (510,615)
Economics (994)
ECON 101 (318)
Lecture

Chapter 9 - Possibilities, Preferences, and Choices.docx

4 Pages
69 Views
Unlock Document

Department
Economics
Course
ECON 101
Professor
Corey Van De Waal
Semester
Fall

Description
Chapter 9 Possibilities Preferences and Choices Consumption possibilities Consumption choices are constrained by income and prices of goodsservices Budget line is the limit to the households consumption choicesPoints within the budget line can be affordedPoints outside the budget line cannotThe budget equationexpenditureincome o Can be PQ PQY 11 22 Where P is price multiplied by Q quantityDivide both sides by Pwhich becomes Q PPQYP 1 1 2121 Subtract PPQfrom both sides which becomes Q YP PPQ 212 1 1 212 YPis Lisas real income in terms of good 1 1o Real income is expressed as a quantity of goods the household can afford to buy o Real income is the point on the budget line where it meets the yaxisPP is the relative price of good in terms of good 2121o Relative price is expressed as the price of one good divided by the price of anothero Relative price is the magnitude of the slope of the budget line o Shows how many good must be sacrificed to have an additional good 12A Change in Prices A rise in the price of the good on the xaxis decreases the affordable quantity of the same good while increasing the slope of the budget line relative price of the two goodsA Change in income A change in income brings a parallel shift of the budget line The slope doesnt change because the relative price doesnt change
More Less

Related notes for ECON 101

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit