Budget Constraint

Question 1

The choices which we make as consumers are not ______________. We are limited by our __________ ________/________.
Therefore consumer choices depend not only on preferences but also on the ‘__________ _______’ available.

Answer 1

The choices which we make as consumers are not unconstrained. We are limited by our available income/wealth.
Therefore consumer choices depend not only on preferences but also on the ‘spending power’ available.

Question 2

Suppose that p1 = 5 and p2 = 10. Then income/wealth of 100 could be spent in several ways (Table)

Answer 2

Question 3

The budget constraint - graphically (picture)

Answer 3

Question 4

Slope of the budget constraint

Answer 4

Question 5

Changes in Price

Answer 5