Marginal utility and indifference curve, Microeconomics

Marginal Utility and Indifference Curve

- If the consumption of a product moves along an indifference curve, additional utility derived from the increase in consumption of single good, food (F), should balance the loss of utility from decrease in consumption in other good, clothing (C).

* Formally:

983_marginal utility and indifference curve.png

* Rearranging:  

1166_marginal utility and indifference curve1.png

  Because:

1969_marginal utility and indifference curve2.png

*  When the consumers maximize satisfaction the:

1346_marginal utility and indifference curve3.png

* Since the MRS is also equal to the ratio of the marginal utilities of consuming F and C, it follows:
1341_marginal utility and indifference curve4.png

*  Which gives equation for the utility maximization?
1510_marginal utility and indifference curve5.png

* Total utility is maximized when budget is allocated such that the marginal utility per dollar of expenditure is same for every good.

* This can be referred to as equal marginal principle.

Posted Date: 10/10/2012 6:40:46 AM | Location : United States







Related Discussions:- Marginal utility and indifference curve, Assignment Help, Ask Question on Marginal utility and indifference curve, Get Answer, Expert's Help, Marginal utility and indifference curve Discussions

Write discussion on Marginal utility and indifference curve
Your posts are moderated
Related Questions


Weston Industrial Manufacturing Products ("WIMP") has the capability to produce a variety of industrial products, including a number of types of widgets. In the past, WIMP has manu

identify three factors to criticize the theory of consumer behavior or utility theory

I need some help to answer a discussion topic question about Potential Pareto Improvement, based on an article

Given the cost function as C=0.3Q3 -2Q2 + 13Q + 25, find the supply function.uestion..

The East Asian Miracle However the set of extraordinarily successful economies isn't limited to the set of original OECD economies. Economies of the East Asian miracle have ove

If the average variable cost curve is horizontal, what is the shape of the short-run marginal cost curve? What shape would the short-run average cost curve be?

How does production possibility curve help solve central problems?

causes of abnormal supply curve