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B udget constraint Suppose c1 and c2 represent the quantities of two goods that an individual consumes, p1 and p2 represent the prices of the

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B udget constraint Suppose c1 and c2 represent the quantities of two goods that an individual consumes, p1 and p2 represent the prices of the two goods, andM is the consumer's income A consumer's budget constraint may be stated as:p1c1 + p202 = M. To plot the budget constraint in (:1, c2) space , the budget constraint equation needs to be rearranged so it is in the form c2 = F(c1, . . . ).2 This equation calculates 02 (the variable on the y-axis) for a given value or}:1 (the variable on the x-axis), and fixed values oM, p1 and 1%,. The given value ofcl and corresponding value of (:2 are a pair of (x,y) coordinates that can be used to plot a specific point on a budget line. Below, the budget constraint is re-arranged to give an equation for a budget line. P131+ 19232 = M (1) => 10262 = M 'P131 (2) M c => :2 = i (3) 302 Recall that the equation for a straight line may be written as1Y = a + EJX, Where a is the value of the intercept andb is the value of the slope . In the case of the budget line above, a = . and b = Ei. P2 P2 1IfyoudonothaveacomputerthathasExcel,youshouldcornpletethisassignmentusingacomputer oncampusattheUniversitythatdoes. Ifyouattempttouseanotherprogrammeandthereisaproblem, yourassignmentwillbegivenamarkofzero,andresubmissionaftertheduedatewillnotbepermitted. 2I.e.the budget constraint equation isrearranged from the form M : F(cl,cz,p1,p2)to the budget line equation inthe form a; : F(c1,...)

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