202 Budget Constraint Explained

Taking off from the basics of consumer theory, we now discuss the dynamics of the budget constraint and what could cause a change in the graph.

A few questions which we can ask ourselves include:

  • What happens when prices of goods change?
  • What happens when we experience an increase/decrease in monetary income?
  • How is my real income affected?
  • What about receiving subsidies in kind and having to pay taxes?
  • How should I apply my indifference curve?

By the end of this video, you should be able to answer the questions above.

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  1. rev says:

    i dint get the last part how is he equally satisfied..?

    • Quickienomics says:

      Hi Rev,
      He is indifferent between the 2 points because both points are tangent to the indifference curve. 🙂