Suppose that in addition to movies, Mr Higgins enjoys concerts, and the average price of a concert ticket is $10 He must select the number of movies he sees and concerts he attends so that his monthly spending on the two goods does not exceed his budget Individuals may, of course, choose to save or to borrow When we allow this possibility, we consider the budget constraint not just for a single period of time but for several periods For example, economists often examine budget constraints over a consumer’s lifetime A consumer may in some years save for future consumption and in other years borrow on future income for present consumption Whatever the time period, a consumer’s spending will be constrained by his or her budget To simplify our analysis, we shall assume that a consumer’s spending in any one period is based on the budget available in that period In this analysis consumers neither save nor borrow We could extend the analysis to cover several periods and generate the same basic results that we shall establish using a single period We will also carry out our analysis by looking at the consumer’s choices about buying only two goods Again, the analysis could be extended to cover more goods and the basic results would still hold Applying the Marginal Decision Rule Because consumers can be expected to spend the budget they have, utility maximization is a matter of arranging that spending to achieve the highest total utility possible If a consumer decides to spend more on one good, he or she must spend less on another in order to satisfy the budget constraint Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 358