3. Consumer Choice

The geometry of the budget set and Walrasian demand — how price and income shifts move the demand curve.

• The Budget Set — Draw the region of bundles you can afford, set by prices and your money. If the two goods together cost more than your money, that bundle is out. The borderline is the budget line. When one good gets pricier, the line rotates inward. With more money, the line shifts outward in parallel. The budget set and slope formulas are below. For example, a 6,000-won allowance buys 🍎 apples at 1,000 won each and 🍌 bananas at 2,000 won each. Apples alone, you can get six; bananas alone, three. If apples rise to 2,000 won, only three apples fit the budget.
• Walrasian Demand and the Demand Curve — Draw a demand curve from Cobb-Douglas tastes, then scale prices and money together. Demand spends a fixed share of the budget on the good. A higher price buys less with that share, sliding you along the curve. Scaling prices and money by the same factor leaves every affordable bundle unchanged. So demand stays put — that sameness is the homogeneity formula below. For example, half of a 10,000-won allowance always goes to 🍞 bread. At 1,000 won a loaf, that buys five loaves. At 2,000 won, it buys only two and a half. Double both the allowance and the price, and you are back to five.