Chapter 8: Utility and Demand
Your consumption choices are categorized under two broad headings:
All the things you can afford to buy (which are different combinations of goods and
services that are limited by your income and the prices that you must pay)
A Consumer’s Budget Line
Marks the boundary between those combinations of goods and services that a
household can afford to buy and those that it cannot afford. As you move along the
BL, the number of goods and services change in correlation to each other (giving up
one for the other)
It marks the boundary between what is affordable and unaffordable for someone.
All the points on and under it are affordable whereas the points above it are
Changes in Consumption Possibilities
Consumption possibilities change when income or price changes.
A rise in income shifts the budget line left but leaves the slope unchanged.
A change in price changes the slope of the line.