ECON 203 Chapter Notes - Chapter 1-6: Five Guys, Budget Constraint, Indifference Curve
Document Summary
As the price goes up, people will want to buy less. Five guys can make a burger for cheaper than a normal person: for them its cheaper for them to produce one more. Price of x (px), how much money m, preferences, prices of everything else py. Hx (px, py, pz, m) we hold py pz and m constant. X = hx (px, py, pz, m1, m2) Demand curve is the relationship between the price of x and the quantity that people buy px, this keeps py, pz, m1 and m2 as fixed. If we change x we are only changing where we are along the curve. Demand curve is x = hx (px) everything else is sort of implied, you don"t have to write it in the equation. Each budget constraint is only tangent to one indifference curve. ( - mux / muy ) = slope of indifference curve = - mrs.
