Budget Line and Indifference Curve Analysis is a flexible and power analytic tool that can be used to gain insight and predictive power over human behavior in a wide variety of situations.

One way the usefulness of BL/IC analysis can be expanded is by being flexible in setting up the BL/IC graph, i.e. what goods we put on the vertical and horizontal axes.

The setups used in this class are:

1. Two goods.
2. One good and a composite good(Income or All Other Goods)
3. A composite good and labor/leisure
4. Income/consumption today and income/consumption in the future.

Consider this BL/IC setup which shows the trade off between Income/Consumption and Leisure/labor in aone day timeframe.

What is the hourly wage rate?

How many hours is the person working at point A?