Robinson Crusoe Economy Flashcards
1
Q
Budget Line
A
The budget line represents all combinations of commodities that a consumer can purchase with their entire wealth.
The slope of the budget line is the negative of the price ratio (-p1/p2), which shows the rate at which the market is willing to substitute one good for the other.
In other words, the consumer can give up p1/p2 units of commodity 2 to obtain one additional unit of commodity 1 without changing their total expenditure.
2
Q
Preferences in an Edgeworth Box
A
3
Q
Edgeworth Box
A
4
Q
Equilbirum in Robinson Crusoe
A
