7. Budget Constraints and Utility Maximization

In this video, I demonstrate how to draw budget constraints (given prices and income). I also demonstrate what the utility maximizing bundle looks like with indifference curves and budget constraints.


Check out a description of my teaching activities here:

www.tonycookson.com/teaching

Check out a list of the videos in this series (organized by topic) here:

http://blog.thisyoungeconomist.com/p/learn-microeconomics.html

Category:

Education

Tags:

• economics
• microeconomics
• lectures
• economics lectures
• microeconomics lectures
• budget constraints
• utility maximization
• tutorial
• educational
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• Education

[galindogirl84]

Great job, but get a camera stand or a more steady hand.

[intromediateecon]

@galindogirl84 Thanks. It won't help this video, but my more recent videos (after vid 20) use a tripod (and my R tutorials use screen capture).

[freeze4real]

must a consumer choose two goods. if i were to maximise utility by picking only a good that i like is that possible.

[intromediateecon]

@freeze4real What you describe is called a "corner solution." It is possible in theory and in these contrived situations. In practice, it is rarely observed. To literally only choose one good and none of "other goods," a person would have to go without a lot of essentials. For example, suppose you maximize utility by having as much ice cream as possible. A corner solution here would mean that you would have *only* ice cream... no shoes, no water, no housing, no television, etc.

[freeze4real]

@intromediateecon

in this situation could a consumer maximize his utility buy buying only a product that's useful to him.

On a graph would a corner situation have a tangency condition?

thanks

[intromediateecon]

@freeze4real Yes, that's possible. At a corner solution, the indifference curve and a budget constraint are not necessarily tangent. To see why, consider a graph. Graphically, a corner solution on the Y-axis would involve an indifference curve that is flatter than the budget line.

[annie4170]

person spends all their money on whisky and dynamite =)

[noneelse1]

how is it that i spend 3 hours learning this in lectures and don't get it but understand it within 3 minutes of this video? thank you so much!

[makeiteasyable]

bravo..i love it.

[immortality64]

stick of dynamite and shots HAHA

[TYDiMaria]

I love you.

[vshel1988]

Thank you! Majorly helpful.

[wishythenwashy]

will you be doing these lectures in foreign languages?

[rrlu]

awesome video! Great help!

Thanks a lot!

[270103023]

Thank

[johannaariz]

Thank you so much. I am an A student but my teacher is extremely confusing. Im reading the book but I do need some explanation. You are very clear and made understand a lot.