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An increase in the money income of the consumer, with p 1 and p 2 constant, will shift the budget line outward parallel to itself. In the figure, this means that the change in the money income of the consumer will shift the budget line B1 outward parallel to itself to B2 where the bundle X ' bundle will be chosen.
In general, the budget set (all bundle choices that are on or below the budget line) represents all possible bundles of goods an individual can afford given their income and the prices of goods. A common assumption underlying consumer theory is the concept of well-behaved preferences, and as such, the direction of an individual's preferences ...
The consumer will maximise their utility at the kink point in the highest indifference curve that intersects the budget line where x = y. [3] This is intuition, as the consumer is rational there is no point the consumer consuming more of one good and not the other good as their utility is taken at the minimum of the two ( they have no gain in ...
If instead, a new budget line is found with the slope determined by the new prices but tangent to the indifference curve going through the old bundle, the difference between the new point of tangency and the old bundle is the Hicks substitution effect. The idea now is that the consumer is given just enough income to achieve his old utility at ...
Consumer debt ratio. Divide your monthly non-mortgage debt payments — like credit card and auto loan payments — by your monthly income after taxes . This should be no more than 20% .
Budget constraints give a straight line on the indifference map showing all the possible distributions between the two goods; the point of maximum utility is then the point at which an indifference curve is tangent to the budget line (illustrated). This follows from common sense: if the market values a good more than the household, the ...
Donald Trump will be assuming the office of U.S. president on Jan. 20, 2025, and his return to the role could usher in a wide variety of economic changes.
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