budget line equation This is a topic that many people are looking for. bluevelvetrestaurant.com is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, bluevelvetrestaurant.com would like to introduce to you Budget Lines and Equations Economics. Following along are instructions in the video below:
“This podcast. I m going to talk about consumer theory. And i m going to to go over homework from the back of chapter. 5.
Problem number 7 in the they give you this all these lines and everything. And i ve changed the color of the line. So you can see them better and the very first thing. We do is we get rid of all these other lines and focus in on the topic at hand get rid of all those little background.
The price of good y is 10. So what is income so if the consumer spends all their income on y. It from the graph you can they can buy 50..
So if income is equal to 50 times. 10. And that 50 again is that 50 there so income is equal to 10 times 50. And that 10 is from there so income is equal to 500.
So where does it go to what is the price of good x. Now we know that income is equal to 500 in other words. If i can spend all my money on x. How much could i buy so we know they could buy 40 maximum so 40 times.
Something is equal to 500 so 500 dollars divided by 40 is equal to 1250. That s the price of good x. So this review income is equal to 500 price of x is equal to 1250..
Price of y is equal to 10 quantity of x is equal to 40 quantity of y is equal to 50 the actual equation for this line is equal to is y is equal to the income divided by price of x. Minus. The price of x. Divided by price of y times x and m and i approve that equation r sub u.
The steps of that in a previous lecture so we have y is equal to the income which is 500 divided by the price of y minus. The price of x divided by the price of y. So if i give you all these things under test. This is the way you should solve this problem.
So. Y is equal to 50. Y is equal to 50 1 25..
Times. X. That would be the equation of that line. What level is consumed the marginal rate of substitution is equal to slope of the budget line at what point.
They don t give you this. But it would be at point c. The marginal rate of substitution is equal to the slope of the budget line. So.
Let s look at this this way so if we look at that the slope of the budget line at point b. They re not the same in fact the slope is much steeper. It be much rate substitution than the budget line at c..
The budget line is steeper than the marginal rate of substitution and it s see it s just right excuse me. So if the budget line shifts out rotates out and lm is a new budget line. The consumer will want to move to a higher indifference curve. Which will be right.
There at point d. The slope of the budget line and d is is equal to negative six point six to five remember there s two ways i get the slope. One is simply the rise over the run it s a negative slope and also the ratio. The prices will be the same ” .
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