【正文】 x1 ? 0, x2 ? 0, x3 ??0 and p1x1 + p2x2 + p3x3 ? m} 2021/11/11 Intermediate Microeconomics 16 Budget Constraints ?For n = 2 and x1 on the horizontal axis, the constraint’s slope is p1/p2. What does it mean? x ppx mp21212= ? ?2021/11/11 Intermediate Microeconomics 17 Budget Constraints ?For n = 2 and x1 on the horizontal axis, the constraint’s slope is p1/p2. What does it mean? ?Increasing x1 by 1 must reduce x2 by p1/p2. x ppx mp21212= ? ?2021/11/11 Intermediate Microeconomics 18 Budget Constraints x2 x1 Slope is p1/p2 +1 p1/p2 2021/11/11 Intermediate Microeconomics 19 Budget Constraints x2 x1 +1 p1/p2 Opp. cost of an extra unit of modity 1 is p1/p2 units foregone of modity 2. 2021/11/11 Intermediate Microeconomics 20 Budget Constraints x2 x1 Opp. cost of an extra unit of modity 1 is p1/p2 units foregone of modity 2. And the opp. cost of an extra unit of modity 2 is p2/p1 units foregone of modity 1. p2/p1 +1 2021/11/11 Intermediate Microeconomics 21 How do the budget set and budget constraint change as ine m increases? Original budget set x2 x1 2021/11/11 Intermediate Microeconomics 22 Higher ine gives more choice Original budget set New affordable consumption choices x2 x1 Original and new budget constraints are parallel (same slope). 2021/11/11 Intermediate Microeconomics 23 How do the budget set and budget constraint change as ine m decreases? Original budget set x2 x1 2021/11/11 Intermediate Microeconomics 24 How do the budget set and budget constraint change as ine m decreases? x2 x1 New, smaller budget set Consumption bundles that are no longer affordable. Old and new constraints are parallel. 2021/11/11 Intermediate Microeconomics 25 Budget Constraints Ine Changes ?Increases in ine m shift the constraint outward in a parallel manner, thereby enlarging the budget set and improving choice. 2021/11/11 Intermediate Microeconomics 26 How do the budget set and budget constraint change as p1 decreases from p1’ to p1”? Original budget set x2 x1 m/p2 m/p1’ m/p1” p1’/p2 2021/11/11 Intermediate Microeconomics 27 How do the budget set and budget constraint change as p1 decreases from p1’ to p1”? Original budget set x2 x1 m/p2 m/p1’ m/p1” New affordable choices p1’/p2 2021/11/11 Intermediate Microeconomics 28 How do the budget set and budget constraint change as p1 decreases from p1’ to p1”? Original budget set x2 x1 m/p2 m/p1’ m/p1” New affordable choices Budget constraint pivots。 slope flattens from p1’/p2 to p1”/p2