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Lecture 2

ECON 102 Lecture 2: Intermediate Microecon Section 3 and 4
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Department
Economics
Course Code
ECON 102
Professor
Hiroki Nishimura

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Intermediate Microeconomics 9.26.16 Lecture #2!
_______________________________________________________________________________ !
!
!
"""budget line!
""""""""P1X1 + P2X2 = m!
"""""""=> X2 = M/P2- P1/P2X1!
""""""!
"""""""" vertical intercept slope !
!
!
!
!
!
!
!
!
!
""""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!
!
!
!
" " " " " " " " " " " " """"""""""""""""""""""""""""""""""""budget line!
!
!
!
!
!
!
!
!
!
"Section 4 Changes in the Budget Line!
!
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 !
!
""vertical intercept slope does not change" " old budget line!
""increases !
!
!
!
!
!
" An increase in income results in a parallel shift outward of the budget line!

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Description
Intermediate Microeconomics 9.26.16 Lecture #2 _______________________________________________________________________________ budget line P 1X 1 + P 2X 2 = m => X 2 = M/P 2- P 1/P 2 X1 vertical intercept slope budget set slope of budget line = - P 1/P 2 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 X 1 (max) = m/P 1 (2) " X 2 " X 2 (max)= m/P 2 budget line Section 4 Changes in the Budget Line Change In Income Suppose that m increases new budget line Recall the first way to draw the budget line x= m/p2 - P 1/P 2 X 1 vertical interceptslope does not change old budget line increases An increase in income results in a parallel shift outw
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