shouldmake them.

2.1 How Individuals Make Choices Based on Their Budget Constraint

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Calculate and graph budget constraints

• Explain opportunity sets and opportunity costs

• Evaluate the law of diminishing marginal utility

• Explain how marginal analysis and utility influence choices

Consider the typical consumer’s budget problem. Consumers have a limited amount of income to spend on the

things they need and want. Suppose Alphonso has $10 in spending money each week that he can allocate

between bus tickets for getting to work and the burgers that he eats for lunch. Burgers cost $2 each, and bus

tickets are 50 cents each. We can see Alphonso's budget problem in Figure 2.2.

Access for free at openstax.org
2.1 • How Individuals Make Choices Based on Their Budget Constraint 29

FIGURE 2.2 The Budget Constraint: Alphonso’s Consumption Choice Opportunity Frontier Each point on the
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