Notes on indifference curve analysis of the choice between. Notes for cbse class 11th chapter 2 consumers equilibrium. Budget is a financial statement showing the expected receipt and expenditure of govt. Indifference curvesbudget lines a c b d e income 100 income 140 income 124 utility 714 utility 892 q2 q1 economics 101 spring 2001 section 4 hallam exam 2a blue for questions 16 consider the diagram below. In economics, the slope of the graph is often quite important. Consumers equilibrium notes microeconomics cbse class. In this note, i show how indi erence curves and budget constraints relate to demand curves. Notes on indifference curve analysis of the choice between leisure and labor, and the deadweight loss of taxation. Intermediate microeconomics notes and assignment chapter 4. Also, since at each point endowment is a ordable, every point on o er curve must be at least as good as.
The first major component of internal accounting systems for managements use is the companys system for establishing budgetary plans and setting performance standards. Consumers budget it is the real purchasing power of consumer from which he can purchase the certain quantitative bundles of two goods at a given price 2. The budget constraint can be represented in the xy space. The first shows a general budget line and the second shows the budget line for the situation where income is. A budget line or price line represents the various combinations of two goods which can be purchased with a given money income and assumed prices of goods. If you are spending all of your money on good 2, then increasing the price of good 1 doesnt change the maximum amount of good 2 you could buythus the vertical intercept of the budget line doesnt change. Budget line rotates because of change in price change in income assume i. This is an important class of problems that crop up time and again throughout economics for example. Cbse class 12 economics notes free pdf download ncert. Cbse class12 economics revision notes macro economics 08 government budget and economy class 12 notes economics. Microeconomics is a branch of economics dealing with individual. Intermediate microeconomics notes and assignment chapter 5. The budget set is the collection of all bundles of goods that a consumer can buy with her income at the prevailing market prices. Before turning to the economics definition of budget line, consider another concept.
Here, the model is presented in its simplest version, based on simplifying assumptions about the behaviour of an individual who wants to spend hisher money on a variety of goods available on the market. Income and substitution effects a quick introduction to be clear about this, this chapter will involve looking at price changes and the response. The price of x 1 is p x 1, and the price of x 2 is p x 2. The budget line represents all bundles which cost the consumer her entire income.
It shows the maximum possible amounts that can be spent on the two goods. Economics notes for ssc cgl exam tier 1 ssc cgl tier 1. Financial economics, and the calculations of time and uncertainty derived from it, are playing an increasingly important role in nonfinance areas, such as monetary and environmental economics. The budget line, also called as budget constraint shows all the combinations of two commodities that a consumer can afford at given market prices and within the particular income level. Indi erence curves, budget lines, and demand curves. Consumer theory consumer theory budgetsbudgets the budget linethe budget line 2. The understanding of the concept of budget line is essential for knowing the theory of consumers equilibrium. No, the slope of the indifference curve is the marginal rate of substitution whereas the slope of the budget line is the economic rate of substitution. Show the income and substitution effect of the decrease in the consumption of soda as the price of soda increases. Microeconomicsindifference curves and budget lines. The setting of performance standards see below performance reporting also requires a system for measuring actual results and. Operational efficiency questions directly related to the arrangements for budget preparation are discussed in section d below. Intermediate microeconomics, lecture 4 economics 352. Consumer theory mark dean lecture notes for fall 2009 introductory microeconomics brown university.
Another way to see how the budget line changes is to use the trick described earlier for drawing the budget line. This is effectively a map of future expenditures, with all the constituent expenditures individually noted and quantified. This chapter focuses on the core processes of budget preparation, and on mechanisms for aggregate expenditure control and strategic allocation of resources. This set of demanded consumptions makes up o er curve just like demand function.
The book consists of 10 chapters summing up the basic spheres of economic theory. Ncert solutions class 12 economics theory of consumer behaviour class 12 economics book solutions are available in pdf format for free download. It is also important to remember that the slope of the budget line is equal to the ratio of the prices of two goods. The budget line can be defined as a set of combinations of two commodities that can be purchased if whole of the given income is spent on them and its slope is. Expert teachers at has created karnataka 2nd puc economics question bank with answers solutions, notes, guide pdf free download of 2nd puc economics textbook questions and answers, model question papers with answers, study material 201920 in english medium and kannada medium are part of 2nd puc question bank with answers. An indifference curve is a line showing all the combinations of two goods which give a consumer equal utility. Where p x and p y denote prices of goods x and y respectively and m stands for money income. Budget line shows various combinations of goods 1 and 2 that a consumer can. What is budget line, price line or budget constraint. The budget line shifts right which means more income makes the a.
Raising incomes by keeping prices constant implies a parallel shift to the right up the budget line and the budget set is widening. The gradient of the budget line reflects the relative prices of the two products i. Notes for cbse class 12 economics free pdf download. The budget line changes which means lower price makes the a. The budget line is therefore a straight line in the commodity space. Ncert solutions class 12 economics theory of consumer. David albouy expected utility and insurance in a two state model 1 expected utility 1.
These lecture notes were prepared by xingze wang, yinghsuan lin, and frederick jao specifically for mit opencourseware. Change in the budgetchange in the budget consumer theory consumer theory budgetsbudgets the budget line change in the pricechange in the price income and substitution effectsincome and substitution effects parts to learn in this ppt. The lecture notes are from one of the discussion sections for the course. A budget line shows the combinations of two products that a consumer can afford to buy with a given income using all of their available budget. In principle the book covers the whole range of problems discussed in the general economics course. Business economics notes pdf, paper bba, bcom 2020.
Budget line it is a graphical delineation of all feasible combinations of 2 commodities that can be bought with provided income. Boston house, 214 high street, boston spa, west yorkshire, ls23 6ad tel. Isc economics question paper 2016 solved for class 12 a. The budget line can be written algebraically as follows. This section provides lecture notes from the course. Important questions for class 12 economics budget set. These ncert book chapter wise questions and answers are very helpful for cbse board exam. An individual has income i, to split between the two goods. Isc economics previous year question paper 2016 solved for class 12 maximum marks. This exercise book is developed for those students who study general economics course while being enrolled in noneconomic study programs and schools. Lecture notes principles of microeconomics economics.
Indifference curves and budget lines economics help. Law of diminishing marginal utility dmu, assumptions of law of dmu, relationship between totally utility and marginal utility. A change in the prices of one or both products with nominal income budget remaining the same. Introduction a basic tool in economics is the mathematical representation of consumer behaviour. We know that the higher the indifference curve, the higher is the utility, and thus, utility maximizing consumer will strive to reach the highest. Answer question 1 compulsory from part i and five questions from part ii. Download business economics notes, pdf, books, syllabus for bba, bcom 2020. Theory of consumer behaviour important questions for class 12 economics budget set, budget line and consumer equilibrium through indifference curve analysis or ordinal approach 1. In this case the slope of the budget line or budget constraint is oa oe or 84 21 since the budget line is a straight line hence its slope is constant shift from any one point to any one point to any other point will yield the same value i. The subtopics for each lecture are related to the chapters in the textbook. Get the complete study material, ppt, courses, question paper, mcq. The above budgetline equation 1 implies that, given the money income of the consumer and prices of the two goods, every combination lying on the budget line will cost the same amount of money and can therefore be purchased with the given income.
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