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Chapter 2 Budget Constraint

Chapter 2 Budget Constraint. The Budget Constraint. m=p1*x1+p2*x2 where I=income, assumed to be given p1=price of x1, assumed to be given. p2=price of x2, assumed to be given. 02.01. Key elements that affect the budget line.

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Chapter 2 Budget Constraint

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  1. Chapter 2Budget Constraint

  2. The Budget Constraint • m=p1*x1+p2*x2 • where I=income, assumed to be given • p1=price of x1, assumed to be given. • p2=price 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 2IntermediateMicroeconomics 6th EditionbyHal R. Varian W. W. Norton & CompanyIndependent and Employee-Owned

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