[ECON 101] - Midterm Exam Guide - Ultimate 31 pages long Study Guide!

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Nafeez Fatima

Document Summary

Qm * pm + qp * p p = y two goods: movie and pop two prices: pm and pp. Qp = 10 2qm ** draw this on a graph** movie on x-axis, pop on y-axis. Changes in the budget line can be caused by change in: Real income in terms of movie increases. Real income in terms of pop increases. In general: a change in income makes the budget line shift without changing the slope. If price of movie changes from to : Line shifts outward only for movie on x-axis. Higher income = shift to the right. Lower income = shift to the left. Higher price = inward rotation of the budget line (not shift) Lower price = outward rotation of the budget line (not shift) In general: a change in price makes the budget line rotate outward or inward note: ** must know how to change in income and/or change of price affects the budget line.