Textbook Notes (368,107)
Canada (161,650)
Economics (923)
ECN 104 (388)
Eric Kam (21)
Chapter 21

Chapter 21

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Department
Economics
Course
ECN 104
Professor
Eric Kam
Semester
Winter

Description
Chapter 21 BUDGET CONSTRAINT (assume only two goods: pepsi and pizza) What the consumer can afford o The limit on the consumption bundles that a consumer can afford o Slope is equal to the opportunity cost of pizza in terms of pepsi (how many pizzas must I give up to receive a certain amount of pepsis) o FALL in income: shift the budget constraint inwards (to the left) o INCREASE in price of 1 good: pivots the budge constraint in wards. Indifference curve o Shows consumption bundles that give the consumer the same level of satisfaction o Marginal rate of substitution (MRS) = slope Rate at which a consumer is willing to trade one good for another (Opportunity
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