Consumption indifference curve - what phrase
In microeconomic theory , an indifference curve is a graph showing different bundles of goods between which a consumer is indifferent. That is, at each point on the curve, the consumer has no preference for one bundle over another. One can equivalently refer to each point on the indifference curve as rendering the same level of utility satisfaction for the consumer. In other words an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer. Utility is then a device to represent preferences rather than something from which preferences come.Consumption indifference curve Video
Indifference Curves consumption indifference curve
This section shows how the demand curve of an individual consumer follows from the consumption choices that a person makes when faced with a budget constraint. To illustrate these concepts graphically, we will limit the avail- able goods to https://digitales.com.au/blog/wp-content/custom/the-advantages-and-disadvantages-of-technology-in/ptsx-stock.php and clothing, and we will rely on the utility-maximization approach described in Section 3.
We begin by examining ways in which the consumption of food and cloth- ing changes when the price of food changes. Figure 4.
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The utility-maximizing consumption choice is at consumption indifference curve B in Figure 4. Here, the consumer buys 12 units of food and 4 units of clothing, thus achieving the level of utility associated with indifference curve U 2. Now look at Figure 4. The horizontal axis cosnumption the quantity of food consumed, as in Figure 4. Point G in Figure 4. As we saw in Chapter 3, the budget line in Figure 4.
The higher relative price of food has increased the magnitude of the slope of the budget line. The consumer now achieves maximum utilityat Awhich is found on a lower indifference curve, U 1.
At Athe consumer chooses 4 units of food and 6 units of clothing. In Figure 4. Finally, what will happen if the price of food decreases to 50 cents? Because the budget consumption indifference curve now rotates outward, the consumer can achieve the higher level of utility associated with indifference curve U 3 in Figure 4. Point H in Figure 4. We can go on to include all possible changes in the price of food.
Note that as the price of food falls, attainable utility increases and the consumer buys more food. This pattern of increasing consumption of a good in response to a decrease in price almost always holds.
But what happens to the consumption of clothing as the price of food falls? As Figure 4. An individual demand curve relates the quantity of a good that a single consumer will buy to the price of that good.]
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