Why is the price vector perpendicular to the budget constraint in micro

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01-22-2009 , 11:55 AM

Jonnymch

adept

Join Date: Nov 2008 Posts: 983

Hey, can anyone tell me in laymans terms (i understand the mathematical derivation) why the budget constraint is perpendicular to the price vector in micro economics. How can you explain this without maths?

01-22-2009 , 07:02 PM

tubasteve

Carpal \'Tunnel

Join Date: Oct 2005 Posts: 14,283

The price vector simply represents all utility-maximizing bundles of goods (I think). Therefore at the maximum of any curve, you can draw a vector pointing outward, which is perpendicular to the curve, pointing in the direction of your max-values. Not sure if that answers your question or not but it's what I've got.

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