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- Budget Equation Overview:
- The Budget Equation
- All the available options when income is used
- = I
- → quantity of x, → quantity of = y
- → price of x, → price of = y
- → income
- Changes to the Budget Equation
- Increase in the price of good x
- Decrease in the price of good x
- Increase in the price of good y
- Decrease in the price of good y
- Understanding the Changes to the Budget Constraint
Suppose a consumer can buy two goods, fruits and candy. The price of fruits is $5 each, and the price of candies are $10 each. If the consumer as an income of $50, then find the budget equation and graph it.
- Suppose you are interested in two goods, monitors and laptops. The price of monitors is $200 each, and the price of laptops are $600 each. If your total income is $1200, then find the slope and y-intercept of your budget equation.
- Suppose a consumer can buy two goods, fruits and candy. The price of fruits is $5 each, the price of candies is $20 each, and the consumer's income is $60. Suppose the income of the consumer increases to $100.
- Suppose a consumer can buy two goods, pencils and erasers. The price of pencils is $2 each, the price of erasers is $1 each, and the consumer's income is $6. Suppose the price of erasers increase to $2.