7. Budget Constraints and Utility Maximization

[@gooddaysir2420]

10 years later from making the video and you are still saving students asses. hats off to you sir!

[@praveenvarghese03]

This is by far the best explanation of why the optimal bundle is the point at which our budget line remains tanget to the farthest indifference curve. Cheers!

[@StephsTV]

dude i love you, you just save me more than 10 hour of studies i am going to keep viewing your videos, if you put more example when are substitute consumer, complement, that would bee awesome

[@jesrah2886]

I was having trouble grasping this topic, thank God I found this video.

[@Agemrepus]

Wow thanks so much for putting this on KZbin! You have no idea how helpful this is to me!

[@carolinnah93]

You have just saved my life... and GPA. THANK YOU.

[@sweedieman3231]

You are good at teaching, thank you for your uploading your videos!

[@lamesurfer101]

Dude! you are RAD! I wish my online prof was as solid as you!

[@POLlyy23]

Thanks. Nice lecture. you have no idea how much i appreciate you naming the abstracts :)

[@intromediateecon]

@freeze4real Yes, that's possible. At a corner solution, the indifference curve and a budget constraint are not necessarily tangent. To see why, consider a graph. Graphically, a corner solution on the Y-axis would involve an indifference curve that is flatter than the budget line.

[@intromediateecon]

@freeze4real What you describe is called a "corner solution." It is possible in theory and in these contrived situations. In practice, it is rarely observed. To literally only choose one good and none of "other goods," a person would have to go without a lot of essentials. For example, suppose you maximize utility by having as much ice cream as possible. A corner solution here would mean that you would have *only* ice cream... no shoes, no water, no housing, no television, etc.

[@Jordancanon91]

You can! you have to use the LaGrangian Method. First take partial derivitives of x y and lamba and then use the subsitution method to isolate each variable and then you can find M. In this case M=X=5 and Y=25

[@enriquesanzposse6197]

thank you!! But, how do you calculate the optimun point for the consumer to consume?

[@intromediateecon]

@samarthc For the conclusions you draw from the problem, it shouldn't matter which good you put on the horizontal/vertical axis. My usual default is to put the good whose price changes on the horizontal axis. If you do this, the graphs are usually easier to draw (and understand).

[@Binxjones]

This is the only thing that has made sense!! Thank you!

[@BudsChiefington]

Your videos have been a great help, just purchased your e-book bundle!

[@intromediateecon]

@Jaiyo17 I agree that is an important question. That is why I address this question in Lecture 9a using calculus. But, the calculus doesn't make much sense without the conceptual foundation given in this video. Check it out if you are curious. Without calculus, use the slopes equal condition (MRS = price ratio) and the budget constraint to provide yourself with two equation for the two unknowns: X and Y.

[@intromediateecon]

Thanks for the compliment. I'll have to do an example with coffee and cake in the near future.

[@intromediateecon]

@samarthc In this case, take your pick for how to draw it. It shouldn't matter. My preference is to put the first price change on the horizontal axis, but that's a quirk in how I set things up.

[@karenlowe641]

best explanation I've seen on this, thank you!

[@johannaariz]

Thank you so much. I am an A student but my teacher is extremely confusing. Im reading the book but I do need some explanation. You are very clear and made understand a lot.

[@tedchirvasiu]

I love the Windows Movie Maker vibes

[@rashadallahverdiyev9877]

This helps a lot for getting better notation. Thank you verrryy much and go on sharing videos :)

[@intromediateecon]

Thanks! The videos where I include calculus are denoted with an A (for "Advanced") next to the lecture number. In my utility maximization with calculus video (Lecture 9A), I use a Cobb-like utility function (U=XY). Now technically, it isn't the usual Cobb-Douglas form, but it is the square of one. Perhaps, I'll do a video on monotone transformations that makes this point.

[@noneelse1]

how is it that i spend 3 hours learning this in lectures and don't get it but understand it within 3 minutes of this video? thank you so much!

[@JoeDaPlumber]

Thank you SOOOO MUCH! I have a final tomorrow in Micro and I was crapping my pants until I saw your vid.

[@waksibra]

So you can't find a precise number for M? Great video! thanks for the help!!!

[@samarthc]

Thank you for your response. But, what if both prices are changing?

[@THEDOCTOR1993]

thanks allot i m really confuse this budget constraint u r good sir

[@adilmansoor92]

This is very clear and concise. Thank you

[@horsecrap666]

Can you do videos with actual working out? I have a budget constraint and I have a function for the utility and I need to find the best possible quantity to maximise utility. I am going along the paths of Price of x / Price of y = MUx/MUy Is that right?

[@samarthc]

I have a question. Say the question says any two goods, (e.g. food and housing). Should we get the same result irrespective of whether we put food on the Y axis or housing? Is there a rule of thumb to follow which one goes onto which?

[@ahmadullahhamid4444]

It was so helpful, thank you and appreciated.

[@xavierbagongon2627]

How did you come up with an indifference curve without solving anything?

[@intromediateecon]

@zaincool20 Yes. My book has the math, graphs, and written discussions (at this level, the math is just algebra, no calculus). I produced the videos as a supplement to the book, so they work better together.

[@zaincool20]

um is the math that you do for all these economic concepts included in the book that occurs on the side of ur video ??

[@intromediateecon]

@galindogirl84 Thanks. It won't help this video, but my more recent videos (after vid 20) use a tripod (and my R tutorials use screen capture).

[@dineojane5020]

Hey , there i can understand the graph , utility and its law . The problem is calculating income . Kindly help

[@dambinny]

I was preparing for my midterm and so clear!:) It would be better if the video is not moving anyway thank you sooooooooo much

[@Theogrn]

My proffesor spent 2 weeks explaining this and i still didnt get it. I watched this once and feel like i can be tested over this, thanks for cutting out the bull shit that comes with classroom style teaching.

[@BurlapZen]

dynamites and whiskey oh yeah

[@realslowandsteady]

love it! thax so much! really easy to understand!

[@KpopNmore]

Thank you so much.. this just clears up everything for me!!

[@yvonnekagondu7030]

do you have anything on fisher separation?

[@lornaoldham6087]

Great explanation !!

[@shyan042688]

Wait... What if I am using my credit card? In that case I may well spend more than I earn... Right?

[@adnansomani8218]

you are a genious i say, and i wish were my prof

[@rituologia]

by the way..i like subtitles...it helps a lot...

[@abdulhassan1201]

great video mate... keep it comin!

[@wishythenwashy]

will you be doing these lectures in foreign languages?

[@rrlu]

awesome video! Great help! Thanks a lot!

[@Xasew]

Next time I plan on getting drunk and blowing shit up, this will come in handy.

[@omnianima4540]

All i needed to hear was at 5:56 i mean it's fairly obvious and simple in general...but i was wondering why it would be something special to draw a concave line where the budget constraint is a tanget, i was like, duh u can just choose the middle point. But it's about the different option the indifference curve shows you, it's not only about one option.

[@vshel1988]

Thank you! Majorly helpful.

[@Negrescu-i7i]

Playback is broken. Can you please fix?

[@fatmaklc939]

I am fr Turkey , it was so benefical for me

[@olasogaolu7011]

Nice one man, really helpful :)

[@najatkamal2866]

1

[@nonhlanhlasithole2093]

You're the Best!!

[@kennethwallace21]

good work sir

[@aylaazad2273]

Thank you, Thank you, Thank you!!

[@Shirleeyho]

THANK YOU! I finally understand it! :D

[@liganizer9]

great work, thank you!!!

[@rituologia]

this video saved my life...hihi

[@damselnat]

Dyanmite and whiskey sounds like a Tom Waits song ;-D

[@bankeajayi]

Thank you!

[@justusochieng6192]

good work

[@JoaoPrenzler]

Thanks a lot!

[@qudiandian]

thanks so much. lifesaver

[@SuperBAZ14]

set up on a tripod thank you

[@ny1fanta]

Perfect

[@a-starsibanjeikosa1009]

thanks a lot

[@FaridAswan99]

Thank you

[@ForevrUnforgivensoul]

THANKS!

[@270103023]

Thank

[@darlenelaurent5105]

Chapter 7 applied problem Number 1

[@omerhalawani6536]

intromediate... NICE

[@MattCookOregon]

very juice

[@linayosefi9991]

Thanks a lot :)

[@gnovakIII]

a kid you not i wish you were my teacher

[@johnbiz1020]

Good deal...

[@hazelwu4623]

helpful thank u

[@m6tt36]

thank you!!!!!!

[@aanaywazir2188]

Your vedios have been very helpful sir ...keep it up ...nd kindly provide us your email adress so that we cant contact for our queries regarding economics.

[@drallisimo34]

cool!!!

[@AJPWPRFU]

Great Vid, but get a new camera man hehe

[@littlemissaudacious]

saviour!

[@bp56789]

Sweet, I can watch the Blair Witch Project on KZbin.

[@SirPdog]

You spent all your income on dry erase markers and none on tripods

[@naemilikius852]

wow 99%

[@bassiroukone7905]

very helpful ?

[@shana2538]

would be nice if camera wasn't moving all the time =)

[@annie4170]

person spends all their money on whisky and dynamite =)

[@Shoppahaulicc]

video made me nauseous all the back and forth

[@KhalilHomaam]

I could not watched it due to disturbing shaking hands! Please purchase a tripod.

[@victoreffendi]

You're the best!!!

[@bankeajayi]

Thank you!

[@haseebahmed07518]

thanx a lot