Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
What happens to the indifference curves when a household's income is reduced?
Question
What is a budget constraint? How does a budget constraint explain consumer choices when used in conjunction with indifference curves? Explain what happens if a household looses half of their income, using a budget constraint and indifference curves in your discussion.
Budget constraint is defined as the locus of different combinations of goods that a consumer could consume/purchase given prices of goods and his income. A rational consumer maximizes his utility within his budget constraint. The utility of the consumer is represented by his indifference curve where Indifference curve is defined as the locus of different combination of goods from which the consumer gets the same level of satisfaction. So a rational consumer would be maximizing his utility where his indifference curve is tangent on budget constraint. At the point of tangency, their respective slopes would be equal and this situation is called first order condition for utility maximization. The slope of the budget constraint is price ratio -(p1/p2) and represent the rate at which the consumer can substitute one good for the other whereas the slope of the indifference curve is negative of Marginal rate of substitution (i.e. -MRS) and represent the rate at which consumer is willing to substitute one good for the other. It is only when these two rates are equal that the consumer would in equilibrium. So tangency between indifference curve and budget constraint would determine the optimal bundle for the consumer. As seen from the figure1 below, indifference curve and budget constraint are tangent at point A.
If a household loses half of this income, then budget constraint would shift inward parallel [from BC1 to BC2] implying now household can consume fewer amounts of both the goods. There would be only income effect. Assuming both the goods are normal, with this decreased income, the consumer would consume less of both the goods implying by new tangency point B.
Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.
Some commentators have argued that the failure of the “Super committee” is good thing for the economy? Do you agree?
Case study analysis about optimum resource allocation: - Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..
Questions: : Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month? Explain your choice.
Problem - Total Cost, Average Cost, Marginal Cost: - Complete the following table of costs for a firm. (Note: enter the figures in the MC column between outputs of 0 and 1, 1 and 2, 2 and 3, etc.)
Problem based on Oligopoly and demand curve, Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?
Explain the impact of external costs and external benefits on resource allocation; Why are public goods not produced in sufficient quantities by private markets? Which of the following are examples of public goods (or services)? Delete the incorrec..
Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..
Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:
Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..
"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"
Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd