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  • Assignment Consumer Behavior

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    Javeria Malik
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    An indifference curve shows combinations of goods that provide equal satisfaction to a consumer. Indifference curves slope downward and are convex because more of one good is needed to compensate for less of another good at a given satisfaction level. Total utility increases as a consumer moves to indifference curves farther from the origin because those curves represent higher satisfaction levels. Indifference curves cannot intersect because that would imply two different consumption bundles provide equal satisfaction.

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    Indifference Curve

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    An indifference curve shows combinations of goods that provide equal satisfaction to a consumer. Indifference curves slope downward and are convex because more of one good is needed to compensate for less of another good at a given satisfaction level. Total utility increases as a consumer moves to indifference curves farther from the origin because those curves represent higher satisfaction levels. Indifference curves cannot intersect because that would imply two different consumption bundles provide equal satisfaction.

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    9 views1 page

    Assignment Consumer Behavior

    Uploaded by

    Javeria Malik
    An indifference curve shows combinations of goods that provide equal satisfaction to a consumer. Indifference curves slope downward and are convex because more of one good is needed to compensate for less of another good at a given satisfaction level. Total utility increases as a consumer moves to indifference curves farther from the origin because those curves represent higher satisfaction levels. Indifference curves cannot intersect because that would imply two different consumption bundles provide equal satisfaction.

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    Assignment

    Consumer Behavior
    Q1. What information is contained in an indifference curve? Why are such curves (a) downward-
    sloping and (b) convex to the origin? Why does total utility increase as the consumer moves to
    indifference curves farther from the origin? Why can’t indifference curves intersect?
    Q2. Assume that the data in the accompanying table give an indifference curve for Mr. Chen.
    Graph this curve, putting A on the vertical axis and B on the horizontal axis. Assuming that the
    prices of A and B are $1.50 and $1, respectively, and that Mr. Chen has $24 to spend, add his
    budget line to your graph. What combination of A and B will Mr. Chen purchase? Does your
    PB
    answer meet the MRS= rule for equilibrium?
    PA

    Units of A Units of B
    16 6
    12 8
    8 12
    4 24

    Q3. Explain how Consumer achieve equilibrium in cardinal Utility Approach by applying utility
    maximizing rule. Explain with the help of schedule.

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