# 201 Indifference Curves & Budget Constraints

Congratulations! You have successfully completed chapter 1! I hope you found it a breeze and as we move on to slightly more advanced topics, you will definitely get a hang of it! So, keep it up, people!!!

To introduce Chapter 2: Consumer Theory and Individual choice, let me give you an illustration. We all love shopping, do we!? I know I do! So I’m walking around town and I enter 2 stores: D&G and L.V.. Thing is… I have a limited budget of \$100000!!

I’m a fashion freak and I live on fashion, baby! But, how many of each brand am I going to buy??? How do I decide?? What makes me satisfied with my purchase at the end of the day? Why do I make certain choices?

That is what this video is about, understanding the basics of how individuals maximize the use of their monetary resources.

At the end of this video, you should be able to:

• Draw and denote important points of the Budget constraint and the indifference curve.
• Understand the concept of Real Income.
• Explain what an Indifference Curve is.

1. The budget equation is important in answering certain questions. I0 = Px0.Xo + Py0.Y0 , where I0 is Income in monetary terms, Px0/Py0 is the price of X/Y and X0/Y0 is the quantity of X/Y purchased at point A.
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1. oz_economist_in_training says:

Great video. Very easy to understand, let’s hope it saves me in my mid-semester exam this week 🙂

• Hey! Thanks for the encouraging comments! All the best for your exams! 🙂

2. Seth says:

hi, do you have a video on explanation on hicksian and slutsky theory cause i am so confused.i also do not know how to draw this two curves and also the understanding of substitution effect and income effects.struggling down here..anyway thanks for all those video it really help

3. TAE HEE says:

very thanks for making such a god video,i learnt a lot from the video bcoz economics really very confusing and challenging.I hope Quickienomics can solve more past year question of UOL in detail bcoz sometimes the question is difficult to be undestand.Can you please try do not use yellow pen?It is quite blur for me to read.Anyway,thanks for the video.

• Hello! Thank you for the nice comments! And yes, I will refrain from using yellow in the future! Thank you for the feedback! 🙂

4. Spere says:

hi!!!

• Quickienomics says:

Hello! 🙂

5. Anna says:

I’ve been looking for economics videos like these for ages. I love how clearly you explain the most important points. Plus, the mind maps?! It’s almost too good to be true! 🙂

• Quickienomics says:

I’m glad it helped Anna! 🙂

Hi there, I don’t quite understand the part on marginal utility, including the formula in your video. please enlighten!

• Quickienomics says:

Hi, which part of it do you know understand?

Hi,

Please could you advise what the formula is for the indifference curve (which is in yellow) @ 05:39?

I find the yellow is very, very difficult to see on youtube.

Thank you for the great videos, it is really helpful.

• Quickienomics says:

Hello! My bad, I stopped using yellow after a few videos. You mean the wordings below the “consumer indifferent”?

8. mb says:

i doze off wen i read books.dis was really helpful, wish u cud do smtn lyk dis for international development