A Short Course in Intermediate Microeconomics with Calculus

In this chapter we will describe the consumer’s standard budget constraint. We will give some examples of special budget constraints created by non-market rationing devices, like coupon rationing. We will also analyze budget constraints involving consumption over time. After describing various budget constraints, we will turn to the consumer’s basic economic problem: how to find the best consumption bundle, or how to maximize his utility, subject to the budget constraint. We will do this graphically using indifference curves, and we will do it analytically with utility functions. In the appendix to this chapter we will describe the Lagrange function method for maximizing a function subject to a constraint.