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    Lecture 11 - BudgetLine and Consumer's Equilibrium

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    Kanishq Baweja
    The document discusses the budget line and consumer equilibrium in economics. 1) The budget line shows all combinations of two goods a consumer can buy given their money income and the prices of the goods. It represents the consumer's affordability. 2) For a consumer with $100 income, goods prices of $5 and $10, the maximum amounts they can buy are 20 units of good X and 10 units of good Y. 3) Consumer equilibrium is reached when a consumer is buying a combination on their budget line that leaves them with no desire to change their purchases, where their highest indifference curve is tangent to their budget line.

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    Lecture 11 - BudgetLine and Consumer's Equilibrium

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    Kanishq Baweja
    228 views6 pages
    The document discusses the budget line and consumer equilibrium in economics. 1) The budget line shows all combinations of two goods a consumer can buy given their money income and the prices of the goods. It represents the consumer's affordability. 2) For a consumer with $100 income, goods prices of $5 and $10, the maximum amounts they can buy are 20 units of good X and 10 units of good Y. 3) Consumer equilibrium is reached when a consumer is buying a combination on their budget line that leaves them with no desire to change their purchases, where their highest indifference curve is tangent to their budget line.

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    Lecture 11_ BudgetLine and Consumer's Equilibrium

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    The document discusses the budget line and consumer equilibrium in economics. 1) The budget line shows all combinations of two goods a consumer can buy given their money income and the prices of the goods. It represents the consumer's affordability. 2) For a consumer with $100 income, goods prices of $5 and $10, the maximum amounts they can buy are 20 units of good X and 10 units of good Y. 3) Consumer equilibrium is reached when a consumer is buying a combination on their budget line that leaves them with no desire to change their purchases, where their highest indifference curve is tangent to their budget line.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    228 views6 pages

    Lecture 11 - BudgetLine and Consumer's Equilibrium

    Uploaded by

    Kanishq Baweja
    The document discusses the budget line and consumer equilibrium in economics. 1) The budget line shows all combinations of two goods a consumer can buy given their money income and the prices of the goods. It represents the consumer's affordability. 2) For a consumer with $100 income, goods prices of $5 and $10, the maximum amounts they can buy are 20 units of good X and 10 units of good Y. 3) Consumer equilibrium is reached when a consumer is buying a combination on their budget line that leaves them with no desire to change their purchases, where their highest indifference curve is tangent to their budget line.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 6

    Budget Line and Consumers Equilibrium

    Rajneesh Kler rajneesh.kler@gdgoenka.ac.in GD Goenka University BBA Program Semester 1

    The Budget Line Income Line


    Assumption of Given Money Income and goods prices
    How can we summarize in graphic manner the combinations of two goods that a consumer can buy Note that the IC shows the preference but not the combinations bought actually

    The budget line shows the affordability of the consumer

    The Budget Line


    Qx X Px + Qy X Py = M Px = 5 Py = 10 M = 100 What is the maximum amount of good X that this consumer can afford to buy? What is the maximum amount of good Y that this consumer can afford to buy?

    Qy
    10

    Maximum Amount of Y which a consumer can buy if he chose not to consume X

    The Budget Line Shows the locus of all possible combinations of good X and Y which a consumer can buy given his money income Maximum Amount of X which a consumer can buy if he chose not to consume Y

    Px/Py

    The Slope of the Budget Line

    20

    Qx

    Consumers Equilibrium
    A consumer is said to be in Equilibrium when he is buying such a combination of goods as leaves him with no tendency to rearrange his purchases of goods (note the assumption regarding the analysis)

    Good Y

    It is reached when line is tangent to possible indifference indifference map consumer. Please assumptions again.

    the budget the highest curve in the of the note the

    E IC4 B IC2 IC1 O Good X IC3

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