ECON 2GG3 Study Guide - Final Guide: Budget Constraint, Unifor, T Helper Cell
Document Summary
2 n units of commodity 1 units of commodity 2 units of commodity n denoted by vector (x1, , xn) commodity prices (cid:224) p 1,p2 pn: when is a consumption bundle (x1, , xn) affordable at prices p1, ,pn, when don"t cost any more than m p1x1 + + pnxn < m. M (cid:224) consumer"s disposable income budget constraint: (budget line) the bundles that are just affordable budget constraint: bundles on the constraint consumer"s budget set is set of all affordable bundles, budget constraint is upper boundary of the budget set composite good: everything else consumer might want to consume other than good 1. Increases in income m: shift constraint outward in parallel enlarging budget set improving choice, original choice isn"t lost, new choices added, cant make consumer worse off decreases in income m, shift constraint inward in parallel shrinking budget set reducing choice, may make consumer worse off.