01:220:102 Chapter Notes - Chapter 5: Budget Constraint, Economic Surplus, Inferior Good

• School: Rutgers University
• Department: Economic
• Course: 01:220:102
• Professor: D.Okada

Document Summary

The buyer"s problem has three parts; what you like, prices, and your budget. An optimizing buyer makes decisions at the margin. An individual"s demand curve reflects an ability and willingness to pay for a good or service. Consumer surplus is the difference between what a buyer is willing to pay for a good and what the buyer actually pays. Elasticity measures a variable"s responsiveness to changes in another variable. How consumers arrive at a choice to what to purchase: what you like, prices of goods and services, how much money you have to spend. When you buy something, you want to buy something that you think will give you the most satisfaction. One pair of jeans that cost , opportunity cost of two sweaters at each. Must take account of all the other goods available. Budget set: set of all possible bundles of goods and services that can be purchased with a consumer income.