Chapter 2 Budget Constraint

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Chapter 2Budget Constraint
2
The Budget Constraint

• mp1x1p2x2
• where Iincome, assumed to be given
• p1price of x1, assumed to be given.
• p2price of x2, assumed to be given.

3
02.01
4
Key elements that affect the budget line

• m (shifting the line up or down without affecting
  its slope)
• Either p1 or p2 affects its slope and position

5
02.02
6
02.03
7
02.04
8
02.05
9
02.06
10
x2
Budget line Buy one and get the second one at
half price
x1
1
2
3
4
11
x2
Budget line Buy one get one free
x1
3
1
2
4
12
This concludes the Norton Media LibrarySlide Set
for Chapter 2 IntermediateMicroeconomics 6th
Edition byHal R. Varian
W. W. Norton CompanyIndependent and
Employee-Owned