3.4 And 3.5

Question 1

How to work out maximum level of consumption

Answer 1

C = w(24-t)

Consumption - c
Wages- w
FREE TIME - t

Question 2

What is the budget constraint

Answer 2

Equation representing all combinations of goods and services one could acquire that would exactly exhaust one’s budgetary resources

Question 3

What is a feasible set

Answer 3

All combinations of goods or outcomes that a decision maker could choose

Question 4

What is the feasible frontier

Answer 4

Upper boundary which is maximum feasible quantity

Question 5

What is the marginal rate of transformation (MRT)

Answer 5

Quantity of a good that must be sacrificed to acquire one additional unit of another good

Question 6

What are the two identified trade offs

Answer 6

MRS
MRT

Question 7

What is the utility point

Answer 7

Where utility is maximised where the indifference curve is a tangent to the feasible frontier

Question 8

What is a constrained choice problem

Answer 8

A problem where a decision maker chooses values of one or more variables to achieve an objective subject tot a constraint that determines a feasible set