Consumer choice, Microeconomics

Consumer Choice 

* 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:

1946_consumer choice.png

Furthermore, the slope of budget line is:

2074_consumer choice1.png

Thus, it can be said that satisfaction is maximized when: 

31_consumer choice2.png

2078_consumer choice3.png

*  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.

2107_consumer choice4.png

1650_consumer choice5.png

Posted Date: 10/10/2012 5:44:09 AM | Location : United States

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