文档介绍：Chapter Two
Budget Constraint
Where are We in the Course?
We are working on the 1st of the ponents of microeconomics: Consumer behavior, production theory, and market.
There are three elements of consumer behavior: budget constraint, preference, and choices.
Consumption Choice Sets
A consumption choice set is the collection of all consumption choices available to the consumer.
What constrains consumption choice?
Budgetary, time and other resource limitations.
Budget Constraints
Q: When is a bundle (x1, …, xn) affordable at prices p1, …, pn?
A: When p1x1 + …+ pnxn £ m where m is the consumer’s (disposable) e.
Budget Constraints
The consumer’s budget set is the set of all affordable bundles; B(p1, …, pn, m) = { (x1, …, xn) | x1 ³ 0, …, xn ³ 0 and p1x1 + …+ pnxn £ m }
The budget constraint is the upper boundary of the budget set.
Budget Set and Constraint for modities
x2
x1
Budget constraint is
p1x1 + p2x2 = m.
m /p1
Affordable
Just affordable
Not affordable
m /p2
Budget Set and Constraint for modities
x2
x1
p1x1 + p2x2 = m is
x2 = -(p1/p2)x1 + m/p2
so slope is -p1/p2.
m /p1
Budget
Set
m /p2
Budget Constraints
If n = 3 what do the budget constraint and the budget set look like?
Budget Set for modities
x2
x1
x3
m /p2
m /p1
m /p3
{ (x1,x2,x3) | x1 ³ 0, x2 ³ 0, x3 ³ 0 and
p1x1 + p2x2 + p3x3 £ m}
Budget Constraints
For n = 2 and x1 on the horizontal axis, the constraint’s slope is -p1/p2. What does it mean?
Increasing x1 by 1 must reduce x2 by p1/p2.