Chapter 5: Consumer Behavior: A Market for Anything? those numbers up for all goods, the result must equal your income. Thus, the budget constraint would look like this for apples and oranges
In this equation, I is your income, pa is the price of an apple, qa is the quantity of apples purchased, po is the price of an orange, and qo is the quantity of oranges purchased.
The slope of the budget constraint equals the price of the good on the horizontal axis divided by the price of the good on the vertical axis.
Assume you budgeted $6.00 to purchase apples and oranges, and the price of an apple is $0.75 and the price of an orange is $0.50. In this case, your budget constraint is
One possible combination of apples and oranges you can purchase with the $6.00 are 2 apples, requiring $1.50 ($0.75×2), and 9 oranges requiring $4.50 ($0.50 ×9). Other possible combinations of apples and oranges you can purchase include 0 apples and 12 oranges, 4 apples and 6 oranges, 6 apples and 3 oranges, or 8 apples and 0 oranges.
Maximizing Pleasure through Consumer Choice and Constrained Optimization Choosing among the incredible number of goods available to you isn’t difficult. Indeed, you do it all the time. You make these decisions based upon what gives you more happiness. You’ve maximized your happiness if you’re indifferent to or less satisfied with any other combination of goods as compared to what you already have.
Identifying indifference I don’t care. You’ve probably said that phrase yourself. When I’m asked whether I want an apple or an orange, and I say “I don’t care,” it means I’m indifferent.
77
