Figure 5-1: Budget constraint

6
16P + 8M = 96
Pizza

24P + 8M = 96
2
BC1
BC2

0 2 4 6 8 10 12
Movies
 Figure 5-2: Increase in the price of pizza

6
16P + 8M = 96
Pizza

24P + 8M = 96
2
BC1
BC2

0 2 4 6 8 10 12
Movies
 Figure 5-3: Decrease in income

6
16P + 8M = 96
Pizza

16P + 8M = 80

BC2 BC1

0 2 4 6 8 10 12
Movies
 Figure 5-4: Budget constraint and

indifference curves

Budget constraint: 8M + 16C = 96

P I4
6 I3
I2
I1
A (2, 5) Budget line
5

E (8, 4)
4

D (6, 3)
3

C (4.5, 2.2)
2

B (10, 1)
1

0
0 2 4 5 8 10 12 M
 Figure 5-5: Corner solution

6
I3

I2

I1

Budget line

12 M
MIT OpenCourseWare
http://ocw.mit.edu

14.01SC Principles of Microeconomics

Fall 2011

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