Marginal utility and indifference curve, Microeconomics

Assignment Help:

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.


Related Discussions:- Marginal utility and indifference curve

Discuss about the evaluation step in analytical frameworks, Discuss about t...

Discuss about the evaluation step in analytical frameworks. Evaluations: The fifth step into studying an economic step is to estimate outcomes resulting through the under

Design process, The outer shape of a football can be described via the foll...

The outer shape of a football can be described via the following equation               Using Matlab, plot the outer shape of a football in  red or orange using a line widt

Elasticities of demamnd, The demand for soft drinks has been estimated asQx...

The demand for soft drinks has been estimated asQx 20PX 0.25PY0.45M 2 Determine the own, cross and income price elasticities of demand. Interpret your results.

Determine the oldest ideas in economics, Determine the oldest ideas in econ...

Determine the oldest ideas in economics One of the oldest ideas in economics is that increases in technology certainly run into natural resource scarcity and so lead to increas

Competitiveness in your industry, a) Collect costs, revenue data, or other ...

a) Collect costs, revenue data, or other data from the industry that you deem relevant. Describe how you would modify the data in order to make it relevant to decisions a manager m

Explain about capital flight, Q. Explain about Capital Flight? Capital ...

Q. Explain about Capital Flight? Capital Flight: A destructive process in that investors (both domestic residents and foreigners) withdraw their financial capital from a countr

Markets, The market structure in the south African mobile telecommunication...

The market structure in the south African mobile telecommunications industry

Social cost of monopoly, Price Discrimination: occurs when the same produc...

Price Discrimination: occurs when the same product is sold at different prices to different consumers. A monopolist divided his consumers into groups and sells his product at vary

What main features are found in oligopolies, What main features are found i...

What main features are found in oligopolies? Assumptions of oligopoly Four or five firm concentration ratio Frequently there are benefits of scale to be had Merg

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd