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

Economic appraisal, Economic appraisal - Appraisal , which seeks to quantif...

Economic appraisal - Appraisal , which seeks to quantify, and where possible calculate the welfare impacts from, the costs and benefits of a project or policy.

Distributive bargaining, Distributive Bargaining An approach to negoti...

Distributive Bargaining An approach to negotiation that finds to divide up a fixed amount of resources.

What is joint stock, Q. What is Joint Stock? Joint Stock: A form of bus...

Q. What is Joint Stock? Joint Stock: A form of business in which company's assets are jointly divided among a large number of different individual owners, each of whom owns a s

What is economics, What is Economics?  Economics is explained as the s...

What is Economics?  Economics is explained as the study of how people choose to use their scarce resources in an attempt to satisfy their unlimited wants. In other words, we h

Define the circular flow diagram, The circular flow diagram is used to repr...

The circular flow diagram is used to represent the interdependence that exists between sectors of the economy.  The diagram illustrates that there are various collections of same e

What is meant by minimum wage, What is meant by minimum wage?  The min...

What is meant by minimum wage?  The minimum wage is the minimum rate a worker can legally be paid (usually per hour) as opposed to wages that are examined by the forces of sup

Growth and patterns multipliers theory, (a) Reasons of Urban Growth (b) Cha...

(a) Reasons of Urban Growth (b) Characteristics of Urban Growth (c) Economic Life of a Building (d) Zone of Transition (e) Location Theory (f) Patterns of Growth Theory (g) Growth

Balancing needs and resources, Balancing Needs and Resources planning ...

Balancing Needs and Resources planning is a balancing act. It involves the balancing of needs with resources towards set goals. Likewise, educational planning involves the bal

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