Economics 1021A/B Chapter Notes - Chapter 9: Indifference Curve, Real Income, Relative Price

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Emilie Rivers

Document Summary

Microeconomics notes chapter 9 possibilities, preferences, and choices. Consumption possibilities: a households budget line describes the limits to its consumption choices, a household is given an income and cannot influence the prices of the goods and services it buys. Divisible and indivisible goods: divisible goods can be bought in any quantity desired. We should also take into account that goods that seem like they cannot. Budget equation: expenditure = income, expenditure = sum of the price of each good multiplied by the quantity bought, y = income, pp qp + pm qm = y. Real income: a households real income is its income expressed as a quantity of goods that the household can afford to buy, for example 40$ / 4$ = 10 cases of pop per month. Aka the change in y over the change in x. If the price of good x rises, the budget line becomes steeper as you can now buy less of good x.