ECON 1000 Chapter Notes - Chapter 9: Indifference Curve, Relative Price, Opportunity Cost
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ECON 1000 Full Course Notes
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A budget line is a line that describes limits to consumption possibilities and that depends on a consumer"s budget and prices of goods and services. A household"s real income is its income expressed as a quantity of goods that the household can afford to buy. A household"s budget line describes the limits to its consumption choices. A household"s budget line shows that a household"s consumption choices are constrained by its income and by the prices of the goods and services it buys. Relative price is the price of one good in terms of another good - opportunity cost. It is obtained by dividing the price of one good by another. If the price of a bag of corn is and the price of gum is 60 cents per pack, the relative price of a bag of corn is (3/0. 60) = 5 packs of gum per bag of corn.