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Chapter 6 Summary (97% in the course

2 Pages
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Department
Economics
Course Code
ECON 2000
Professor
All

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Description
Chapter 6 SummaryHOUSEHOLD CHOICE IN OUTPUT MARKETS p1211 Every household must make three basic decisionsa How much of each product or output to demandb How much labor to supplyc How much to save for the future2 Income wealth and prices define a household budget constraint The budget constraint separates those combos of goodsservices that are available from those that are NOT All the points belowto the left of the graph of a household budget constraint make up the choice set or opportunity setchoiceopportunity setbudget constraint 3 It is best to think of the household choice problem as one of allocating income over a large number of goodsservices A change in the price of one good may change the entire allocation Demand from some goods may rise while demand for others may fall4 As long as a household faced limited income the real cost of any single good or service is the value of the next preferred other goodsservices that could have
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