Educationist

  The consumers will tend to consume a combination of products such that the marginal utility per dollar spent on each product is the same. The slope of the budget constraint called the price ratio is the price of the product on the horizontal axis divided by the price of the product. On the vertical axis the price ratio describes the rate in which one can trade off beer for pizza and keep total expense constant.  For example suppose price of beer is $1 in the price of a slice of pizza is $2 the price ratio is the price of Pizza divided by the price of beer or 2/1 or 2. A price ratio of 2 means that you could exchange two beers for one pizza and your total expense would not change.  For example suppose you have 10 beers and 10 pizzas your total expenses 30 dollars. If you exchange two beers for one Pizza you're left with eight beers and 11 pizzas your total expenses now eight beers times $1 plus 11 pizzas times two dollars a pizza or $30. As long  as you exchange b...

Why demand curve slope downward? The demand curve demonstrates how much people are willing to buy at different prices? Supply and demand are fundamental concepts in economics. Usually, they're represented by a graph like this. So what does this mean? Well, let's start with the demand curve. In short, a demand curve shows how much of a good people will want at different prices. Well, at a lower price, people buy more. More shirts, more pants, more video games,  and they do stuff like this. This is what happens on Black Friday  when retailers lower their prices to get people  to buy stuff for Christmas.  The demand curve illustrates the intuition for why people  go nuts on Black Friday. Price is shown on the vertical axis,  and quantity is shown on the horizontal. Here's the normal price, and here's the Black Friday reduced price. Simply put, the quantity demanded increases as the price gets lower. But let's delve a ...