* Consumers choose a combination of goods which will maximize satisfaction they can attain, given the some degree of budget available to them.
* The maximizing market basket should satisfy two conditions:
1) It should be located on budget line.
2) Should give consumer the most preferred combination of goods and services.
Keep in mind, the slope of an indifference curve is:
Furthermore, the slope of budget line is:
Thus, it can be said that satisfaction is maximized when:
* Designing New Automobiles (II)
- Consider the two groups of consumers, each willing to spend $10,000 on the styling and performance of the cars.
- Each of the group is having different preferences.
- By finding the point of tangency between a group's indifference curve and budget constraint auto companies can design both production and marketing plan.