What is a budget constraint?
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What is a budget constraint? How does a budget constraint explain consumer choices when used in conjunction with indifference curves? Explain what happens if a household loses half of their income, using a budget constraint and indifference curves in your discussion.
At the consumer's optimum:
the indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
it is still possible for the consumer to increase his consumption of both goods.
the budget constraint will have a slope of MUx/Px.
the slope of the indifference curve is equal to the slope of the budget constraint.