
Lec 3: Budget Constraints and Constrained Choice
MIT's Principles of Microeconomics course (14.01, Fall 2023) continues with Professor Jonathan Gruber explaining how consumers make choices when their spending is limited by income and prices. He builds the budget constraint as a line on a graph, showing how its slope reflects relative prices and how shifts in income or price move the line itself. Gruber then brings this constraint together with consumer preferences from the previous lecture to find the point of constrained choice, the combination of goods a rational consumer actually picks given what they can afford. SNAP benefits come up as a real-world case, used to illustrate how a government transfer changes the shape of a household's budget constraint and the choices available within it. The lecture is chalkboard-and-graph driven, typical of Gruber's teaching style, building the model step by step rather than presenting finished conclusions.