上财中级微观经济学课Ch02Budget.pptVIP

Intermediate Microeconomics Chapter Two Budgetary and Other Constraints on Choice 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 A consumption bundle containing n commodities is denoted by the vector (x1, x2, … , xn). Commodity prices are p1, p2, … , pn. Budget Constraints The bundles that are only just affordable form the consumer’s budget constraint. This is the set{ (x1,…,xn) | x1 3 0, …, xn 3 0 and  p1x1 + … + pnxn = m }. 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 Two Commodities Budget Set and Constraint for Two Commodities Budget Set and Constraint for Two Commodities Budget Set and Constraint for Two Commodities Budget Set and Constraint for Two Commodities Budget Set and Constraint for Two Commodities Budget Set and Constraint for Two Commodities Budget Constraints If n = 3 what do the budget constraint and the budget set look like? Budget Constraint for Three Commodities Budget Set for Three Commodities Budget Constraints For n = 2 and x1 on the horizontal axis, the constraint’s slope is -p1/p2. What does it mean? 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. Budget Constraints Budget Constraints Budget Constraints How do the budget set and budget constraint change as income m increases? Higher income gives more choice How do the budget set and budget constraint change as income m decreases? How do the budget set and budget constraint change as income m decreases? Budget Constraints - Income Changes Increas