Concept #1: Budget Constraint (Budget Line)
Practice: The Amazing Andy spends all of his $1,200 income on magic tricks. If card tricks cost $50 and wand tricks cost $300, which of the following consumption bundles lies upon Amazing Andy’s budget constraint?
Concept #2: Budget Constraint: Change in Income
Practice: An increase in income will:
Concept #3: Budget Constraint: Change in Price of a Good
Practice: A change in the price of one good will:
Practice: A consumption bundle inside the budget line
Practice: Lil Kiddo just got $10 for his allowance. He has big dreams for that money and plans to buy out the toy store, slapping down the tenner at the cash register. Disillusioned, he decides to buy pogs for $0.50 each and action figures for $2 each. Which consumption bundle is unaffordable to Lil Kiddo?
Practice: Campin’ Sam buys firewood and ice. When the price of firewood decreases, the maximum number of firewood she can purchase _____________ and the maximum number of ice she can purchase _______________