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
Mathematical Derivation of ordinary demand function: Here we present the mathematical and more general proof of the above result. Consider, again, the initial price income sit

Are there any economic effects to non-Hispanic whites, given that they no longer represent the majority of the population? Why are these examples important from an economic standpo



Interest: A lender charges interest as the price of lending money (or some other asset) to a borrower. Interest is mainly charged as a specified percentage of the loan's value, per

What are the most important challenges that economists try to address? (ii) What is the role of government in a market based economy? (iii) Who are the main economic players and w

1.      How can a nation and its producers determine whether or not it has a comparative advantage in producing a particular good or service? a 2.  The above figure show

Examine the factors that influence a country s exchange rate. Suppose and define a floating exchange rate, the major issue here is to outline the factors influencing the supply

IN YOUR OWN WORDS,HOW DO YOU DIFINE TRANSPORT ECONOMICS?GIVE RELAVANT EXAMPLES OF THIS AREA OF ECONOMICS.

Externalities: Many economic activities have collateral effects (at times positive, but more often negative) on other people who aren't directly involved in that activity. Illustra