UMD
ECON 200 -
Chapter 21: The Theory of Consumer Choice
School name
University of Maryland, College Park
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Chapter 21: The Theory of Consumer Choice The Budget Constraint: What the Consumer Can Afford - people consume less when their income is constrained (income) - Suppose the consumer has an income of $1,000 and spends it all on pizza ($10) and pepsi ($2) - Point A- consumer spends all income on pizza and none on pepsi - Point B- consumer spends all income on pepsi and none on pizza - Point C- consumer spends equal amount on each (right in between A and B) - Budget constraint- line that shows consumption bundles that the consumer can afford - Budget constraint shows trade-off between pizza and pepsi - Slope off budget constraint meaures the rate at which the consumer can trade one good for the
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