Budget line

Сентябрь 10, 2022

Содержание

2. The ability of consumers to buy products X and Y is determined by budget constraints, which
3. Assume that the consumer has a limited amount of money, which he will spend on the
4. Budget Equation will be: The budgeting line is a set of all combinations of products X
5. The inclination of the budgeting line: Quantity of Y, consumed for some definite period Quantity of
6. Consumer balance The balance point can be found by tracing the budget line on the map
7. At the tangency point the inclination of the indifference curve is equal to the inclination of
8. The model suggests that the total utility of consumption is maximized if the consumer’s income is
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The ability of consumers to buy products X and Y is

determined by budget constraints, which may be expressed graphically by the budgeting line

if you buy a stool, than a rope and a soap are a gift

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Assume that the consumer has a limited amount of money, which

he will spend on the products X and Y

Suppose he'll spend the entire sum

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Budget Equation will be:
The budgeting line is a set of all

combinations of products X and Y that can be acquired, if consumer will spend his whole income

Quantity of Y, consumed for some definite period

Quantity of X, consumed for some definite period

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The inclination of the budgeting line:
Quantity of Y, consumed for some

definite period

Quantity of X, consumed for some definite period

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Consumer balance
The balance point can be found by tracing the budget

line on the map of indifference for products X and Y

Quantity of Y, consumed for some definite period

Quantity of X, consumed for some definite period

The balance point is a point of tangency of the budgeting line and indifference curve representing achievable combination of X and Y, which provides the highest level of utility

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At the tangency point the inclination of the indifference curve is

equal to the inclination of the budgeting line:

This is the same model, which provides a quantitative approach

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The model suggests that the total utility of consumption is maximized

if the consumer’s income is distributed so that the marginal utility per 1 ruble of expenses for each product is the same

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