Explain the concept of budget line and indifference curve

Reference no: EM133564145

Assignment:

Suppose a consumerhas a budget of RM300 to spend on two goods: laptops(X) and smartphones (Y). The price of laptops is RM150 each, and the price of smartphones is RM50 each.

1. Draw the consumer's budget line and an indifference curve for laptops and smartphones. Label the axes and points appropriately. (Students are required to construct the budget equation) (5m)

Diagram: Budget Line (1m), indifference curve (1m), y-axis & x-axis with labels (1m), optimal point (1m), budget equation (1m)

2. Explain the concept of the budget line and indifference curve. How do they represent the consumer's choices and preferences without using utility functions? (5m)

Explanation (5m)

3. Assume the consumer is currently at point A on the budget line, where they are purchasing 2 laptops and 4 smartphones. Analyze the consumer's trade-offs at this point and explain why this combination of goods is affordable. (5m)

Explanation (3m), calculation (2m)

4. Discuss how changes in the prices of laptops and smartphones would affect the consumer's budget line and their optimal consumption point. Analyze how a decrease in the price of laptops or smartphones would impact their consumer equilibrium.

Reference no: EM133564145

Questions Cloud

Describe some of the transformations : Describe some of the transformations that may be taking place and explain how their experiences might differ given their genders

Discuss how enterprise risk management connects : Discuss how enterprise risk management (ERM) connects the governance levels through escalation of risks and risk management strategies. Be sure to define

Identify the functions of political parties : Identify the functions of political parties. Correct Answer(s) Drag appropriate answer(s) here Political parties raise money for candidates' campaigns.

What are your thoughts on what specific aspects : What are your thoughts on what specific aspects of patient interviewing are most relevant to acupuncture or integrative health or coaching

Explain the concept of budget line and indifference curve : Explain the concept of the budget line and indifference curve. How do they represent the consumer's choices and preferences without using utility functions?

Explain the political rationale of federal systems : Explain the political rationale of federal systems-the benefits that each partner gains from the association, and the advantages for the citizens of the nation.

What were the notable differences and similarities : What were the notable differences and similarities of each organization? How does the mission and vision statement of organizations frame the leadership

Why do many republicans support trump even when he has 91 : Why do Many Republicans support Trump even when he has 91 indictments and point out that Biden is unfit for the presidency due to his age? Please provide

What type of feedback is recommended and why : what type of feedback is recommended and why? 19. Why is it important to keep an open mind when dealing with patients of varied ethnic backgrounds?

User Account

All Pages