[经济学]中级西方经济学 2.pptVIP

Chapter Two BUDGET CONSTRAINT Components of microeconomics Consumer behavior production theory market Three elements of consumer behavior Budget constraint preference choice Consumption Choice Sets Def: 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 affordable at prices ? A: When where m is the consumer’s (disposable) income Budget Constraints The consumer’s budget set is the set of all affordable bundles: and The budget constraint is the upper boundary of the budget set. Example: Budget Set and Constraint for  Two Commodities Extension If n=3 what do the budget constraint and the budget set look like? What does the constraint’s slope mean? Increasing x1 by 1 must reduce x2 by p1/p2 Determinants to Budget Constraints Determinants: Income and Price Thus, what happens as prices or income change? Case 1: Higher income gives more choice Welfare judgment: ◆ No original choice is lost and new choices are added when income increases, so higher income cannot make a consumer worse off. (Better off) ◆ An income decrease may make the consumer worse off Case2: Price Changes What happens if just one price decreases? (suppose p1 decrease) Welfare Judgement Reducing the price of one commodity pivots the constraint outward. No old choice is lost and new choice are added, so reducing one price cannot make the consumer worse off What if the price of one commodity increases? Example 1: Uniform Ad Valorem Sales Taxes  （从价税） An ad valorem sales tax levied at a rate of 5% increases all prices by 5%, from p