How budget constraints affect consumer choices
Acton Institute Powerblog

How budget constraints affect consumer choices

Note: This is post #70 in a weekly video series on basic microeconomics.

There are numerous variables that determine the price of goods and services—including your willingness to pay the price. Because we have choices in what we buy, the price is relative to other goods. For example, one pizza may cost the equivalent to two cups of coffee so we have to make tradeoffs between goods.

We also have budget constraints, which are a crucial variable in helping you decide whether to spend $5 on a cup of coffee, or $5 on something else. In this video by Marginal Revolution University, economist Joana Girante examines how such budget constraints function by graphing a simple example: $50 to spend on $5 coffees or $10 pizzas.

(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)

Click here to see other videos in the Introduction to Economics series.

Joe Carter

Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).