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Budget Constraints: Change in Price

Budget Constraints: Change in Price

Author: Justin Tapp

This lesson will explain Budget Constraints: Change in Price

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Notes on "Budget Constraints: Change in Price"

Terms to Know

Budget Constraint

The graphical depiction of consumer income relative to the price of goods available. Where the budget constraint touches the highest indifference curve available, the consumer is defined to be optimizing consumption.


The cost of goods or services.

Income Effect

Consumers’ purchasing power changes as income changes, affecting demand for a good or service.

Substitution Effect

When income decreases or price rises, cheaper goods and services are consumed instead of the more expensive alternative.