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Budget Constraints: Effect on Goods by Justin Tapp

Budget Constraints: Effect on Goods by Justin Tapp

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Author: Sophia Tutorial
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Identify the type of good effected by a change in income.

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Tutorial

Video Chapters

(00:00 - 00:11) Intro
(00:12 - 00:29) Budget Constraint and Optimal Choice
(00:30 - 01:17) Plotting a Budget Constraint
(01:18 - 01:57) Increase in Income
(01:58 - 02:33) Normal Goods and Inferior Goods
(02:34 - 03:10) Plotting a Movement Toward Normal Goods Given an Increase in Income
(03:11 - 03:25) Review

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.

Inferior Goods

Goods for which demand decreases as income increases.

Normal Goods

Goods for which demand increases as income increases.

Optimal Choice

Goods and services purchased by a consumer that provides the highest level of utility possible.