ECON 2310 Chapter Notes - Chapter 5: Indifference Curve, Demand Curve, Engel Curve

• School: University of Guelph
• Department: Economics
• Course: ECON 2310
• Professor: Asha Sadanand

Document Summary

About constraints & trade-offs & how to resolve decisions. Income (m): consists of money received during fixed period of time (ie: hour, day, year) Budget constraint = cost of consumption bundle =< income (formula) pxs + pyb =< m. So, slope of budget line = -px/py. So, vertical intercept @ m/py (if he spends all money on y) Therefore, horizontal intercept @ m/px (if he spends all his money on x) To the left of the budget line; bundles do not exhaust consumer"s income. To the right of the budget line; bundles exhaust more than consumer"s income. Move budget line but keep same slope (parallel shift) Increase income = shift outwards, decrease income = shift inwards. Move budget line and change the slope (because either px or py will change) Increase price = shift steeper, decrease price = shift less steep.