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#cfa #cfa-level-1 #economics #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #section-4-the-opportunity-set #study-session-4

Assuming a one-period model Warren has no reason *not* to spend all of his income so the weak inequality becomes a strict equality, as shown in Equation 4, because there would be no reason for Warren to save any of his income if there is “no tomorrow.”

Equation (4)

*P _{B}Q_{B}* +

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**4. THE OPPORTUNITY SET: CONSUMPTION, PRODUCTION, AND INVESTMENT CHOICE**

the expenditure on wine does not exceed his income per time period. We can represent this income constraint (or budget constraint ) with the following expression: Equation (3) P B Q B + P W Q W ≤ I <span>This expression simply constrains Warren to spend, in total, no more than his income. At this stage of our analysis, we are assuming a one-period model. In effect, then, Warren has no reason not to spend all of his income. The weak inequality becomes a strict equality, as shown in Equation 4, because there would be no reason for Warren to save any of his income if there is “no tomorrow.” Equation (4) P B Q B + P W Q W = I From this equation, we see that if Warren were to spend all of his income only on bread, he could buy I/P B slices of bread. Or if he were to confine his expenditure to wi

the expenditure on wine does not exceed his income per time period. We can represent this income constraint (or budget constraint ) with the following expression: Equation (3) P B Q B + P W Q W ≤ I <span>This expression simply constrains Warren to spend, in total, no more than his income. At this stage of our analysis, we are assuming a one-period model. In effect, then, Warren has no reason not to spend all of his income. The weak inequality becomes a strict equality, as shown in Equation 4, because there would be no reason for Warren to save any of his income if there is “no tomorrow.” Equation (4) P B Q B + P W Q W = I From this equation, we see that if Warren were to spend all of his income only on bread, he could buy I/P B slices of bread. Or if he were to confine his expenditure to wi

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