The budget line, Microeconomics

The Budget Line The line BB gives the persons budget constraint. It is described by the linear equation

c + wl = w;

which can be rewritten as

c = w - wl:

The budget line gives all the consumption-leisure combinations that the person can potentially enjoy with his one unit of time.1 The slope of the budget constraint is given by (the negative of) the wage rate, w. Think about this as representing the relative price of leisure in terms of consumption: if the person desires to enjoy an extra unit of leisure he must sacrifice w in terms of consumption. If the person worked all of his time, so that leisure was zero, then his consumption would be w. This is the vertical intercept of the line. If he did not work, then his leisure would equal one, implying l = 1. He would of course have no consumption, so c = 0. This is the horizontal intercept.

 

Posted Date: 3/25/2013 6:28:40 AM | Location : United States







Related Discussions:- The budget line, Assignment Help, Ask Question on The budget line, Get Answer, Expert's Help, The budget line Discussions

Write discussion on The budget line
Your posts are moderated
Related Questions
The Cost Minimizing Input Choice - Assumptions Two Inputs: Labor (L) & capital (K) Price of labor: wage rate (w) The capital price - R = depreciation ra


an emission fee levied against polluting firms will tend to shift the supply/demand curve of the firm/product to the left/right?

How we constract the cost structure of firms

causes and effect of the unemployment


INDIVIDUAL DEMAND * Price Changes - Using figures developed earlier, the impact of a change in price of food can be shown by using indifference curves.  Effect of Price

China had to convert its yuan into dollars. Does that cause the dollar to appreciate or depreciate?

explain two theories of economic rent

what are the pros and cons of monopsony