You should include a production possibilities (PPF) curve that is tangent to the slope at Y1,Y2. It is difficult for folks to understand why you happen to be anchoring Y1,Y2 where you do on the diagram. Otherwise, this is really helpful!
I really don't get why I2 goes in that specific place on the new budget constraint line when the interest rate increases. Ive been struggling with this concept since i started drawing budget constrain curves
what will happen when the interest rate for borrowing goes down but the interest rate for saving stays the same. However the consumer is a saver how would it affect the graph?
For a saver, when interest rate increases, he is consuming more (instead of saving more and consuming less). Can you please explain the intuitive logic?
Intuitively, it is important to remember that people want to consume as much as possible. We gain utility from buying things (consumption). If we are a saver and the interest rate increases, we are effectively earning more (we gain more interest on our savings). This allows us to consume more, so we will, because this will increase our utility.
This is effectively just the opposite of an increase in the interest rate. The budget line gets steeper when we increase the interest rate, so it gets flatter when we decrease the interest rate. The consequences of the flatter budget line follow as the opposite of what we observed from a steeper one
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This was very helpful! You explained this better than my Macroeconomics professor. Thank You!
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You should include a production possibilities (PPF) curve that is tangent to the slope at Y1,Y2. It is difficult for folks to understand why you happen to be anchoring Y1,Y2 where you do on the diagram. Otherwise, this is really helpful!
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You mentioned in the aggregate all borrowing is equaled to all savings, what about net export and net capital flow?
This seems to work if savers get some interest in their savings or buy some bonds, which is not always the case.
Thank you very much for uploading
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The last part of the video
Why is the Income Effect negative on the C2 axis
I thought the income effect(CE) is reinforcing the substitution effect(SE) so it should be positive
I really don't get why I2 goes in that specific place on the new budget constraint line when the interest rate increases. Ive been struggling with this concept since i started drawing budget constrain curves
How would you know where on the new budget constraint the new indifference curve is going to be?
at 13:26 why does c2 increase and c1 decrease when there's an increase in interest rate for borrowers?
st 10:00 why does c1 and c2 both increase for both time periods?
what will happen when the interest rate for borrowing goes down but the interest rate for saving stays the same. However the consumer is a saver how would it affect the graph?
Tnx 4 sharing how to allocate capital
For a saver, when interest rate increases, he is consuming more (instead of saving more and consuming less). Can you please explain the intuitive logic?
Intuitively, it is important to remember that people want to consume as much as possible. We gain utility from buying things (consumption).
If we are a saver and the interest rate increases, we are effectively earning more (we gain more interest on our savings). This allows us to consume more, so we will, because this will increase our utility.
what will happen when the interest rate decreases?
This is effectively just the opposite of an increase in the interest rate. The budget line gets steeper when we increase the interest rate, so it gets flatter when we decrease the interest rate. The consequences of the flatter budget line follow as the opposite of what we observed from a steeper one
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