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Lecture 2

ECON 102 Lecture Notes - Lecture 2: Budget ConstraintPremium

2 pages26 viewsFall 2016

Department
Economics
Course Code
ECON 102
Professor
Hiroki Nishimura
Lecture
2

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Intermediate Microeconomics 9.26.16 Lecture #2!
_______________________________________________________________________________ !
!
!
"""budget line!
""""""""P1X1 + P2X2 = m!
"""""""=> X2 = M/P2- P1/P2X1!
""""""!
"""""""" vertical intercept slope !
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!
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!
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""""budget set!
!
!
"""""slope of budget line = - P1/P2!
!
2.) another way to draw budget line!
"(1) compute how many x1 the consumer can buy if she uses her entire income on good 1!
""!
"X1 (max) = m/P1!
!
"(2) " " " X2 """""!
""""X2 (max) = m/P2!
!
!
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" " " " " " " " " " " " """"""""""""""""""""""""""""""""""""budget line!
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"Section 4 Changes in the Budget Line!
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Change In Income!
"Suppose that m increases!
" " " " " " " " " " " " """""""""""""""""""new budget line!
"Recall the first way to draw the budget line!
""x= m/p2 - P1/P2 X1 !
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""vertical intercept slope does not change" " old budget line!
""increases !
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" An increase in income results in a parallel shift outward of the budget line!
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