EC 100

MICRO

CONSUMER CHOICE

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Optimal Basket changed preferences changed income changed price
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Consumer Choice I

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Constructing Budget Constraint and Locating Optimal Basket

 

Notation

I

Income

 

 

pa

price of apples

pb

price of bananas

qa

quantity of apples

qb

quantity of bananas

 

 

Budget Constraint

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=  paqa  pbqb

Income equals expenditure on apples plus expenditure on bananas

Assume:

= 100  ; p10  ;   p10 ;

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100  =  10qa  10qb

   q=  10 - 1qa 

 

 

 

 

 

 

 

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