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Budget Constraints
* The Budget Line
- The budget line indicates all the combinations of 2 commodities for which total money spent equals the total income.
- Let F equal the amount of food which is purchased, and C is amount of clothing.
- Price of food = Pf and price of clothing = Pc
- Pf F is the amount of money spent on food, and PcC is amount of money spent on clothing.
* The budget line then can be given by:
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Indifference Curves: Every consumption-leisure point, (l; c), in the diagram is associated with a unique level of utility. The line II represents the individuals indifference curv
SHOW MATHEMATICAL EXAMPLE
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