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ECON 103

Which bundle makes the most of your budget?

Explore budgets, utility and the best affordable bundle, then separate the income and substitution effects of a price change. Solve 10 questions with worked answers and changing pictures.

What the budget allows · Step 1 of 12

A budget limits the bundles you can buy

Fictional goods X and Y: budget and satisfaction
Good Y (quantity)
X₀Y₀AB
Good X (quantity)
B. Marked point A.
B: budget
A: X = 8; Y = 18
Our invented shopper chooses fictional goods X and Y with income $120, X price $6 and Y price $4. A bundle is a pair of quantities. Spending below income is affordable; spending equal to income puts the bundle on the budget line.
Try it: Move the quantities and income. Watch the point cross the budget line.
Income$120
Quantity of X8
Quantity of Y18
Spending
$120
Money left
$0
Bundle
Affordable; all spent
Spending = PX × X + PY × Y.
Spending = (6 × 8 + 4 × 18) = $120.
Income − spending = (120 − 120) = $0.
Affordable; all spent.
Check yourself
A bundle costs exactly the shopper’s income. Where is it?

Exam coming up and income versus substitution effects still blur?

Bring your problem sets. We work through them together until every type feels routine.

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