ECO101H1 Lecture Notes - Lecture 13: Relative Price, Budget Constraint, Indifference Curve
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ECO101H1 Full Course Notes
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Eco100y1 lecture 13 topic 6: the theory of consumer demand ii. Main purpose: to optimize consumption (what the consumer can afford and what they want) The optimum is the point on the budget constraint that touches the highest possible indifference curve. (the optimum is the bundle hurley prefers most out of all the bundles he can afford. ) We will only solve these problems graphically, no complex calculus in this intro economics class. Tip: don"t get too worried when questions talk about labour and wages, just imagine them as two goods and compare them that way. (slide 18 on the powerpoint shows an example) Point c is on an indifference curve, this satisfies hurley, but it"s not optimized. To maximize, we want to have a point that sits on the threshold of the budget constraint. As we move from c to d, we don"t change the level of satisfaction, but we"re optimizing.