Concept introduction:
Budget Line:
It is defined as the combination of all the goods that a consumer can purchase, exhausting all his income. The formula for the budget line is:
Here,
- is the quantity of good X.
- is the quantity of good Y.
- is the total income.
- is the price of good X.
- is the price of good Y.
Indifference Curve:
The line that shows the goods providing the same satisfaction level is known as the indifference curve.
The different properties of indifference curve are:
- Two indifference curve lines never intersect each other.
- The farther the Indifference Curve is from the origin the more utility it has.
- Indifference Curve slopes downwards because more is better.
- Indifference Curve has a convex shape because of the diminishing marginal utility which states tthat marginal
utility of an additional unit decreases.
Inferior goods:
It is a type of good in which the demand declines with a rise in income. Example:the demand for potato decreases as income increases because we prefer green vegetables at higher income.
Concept introduction:
Budget Line:
It is defined as the combination of all the goods that a consumer can purchase, exhausting all his income. The formula for the budget line is:
Here,
- is the quantity of good X.
- is the quantity of good Y.
- is the total income.
- is the price of good X.
- is the price of good Y.
Indifference Curve:
The line that shows the goods providing the same satisfaction level is known as the indifference curve.
The different properties of indifference curve are:
- Two indifference curve lines never intersect each other.
- The farther the Indifference Curve is from the origin the more utility it has.
- Indifference Curve slopes downwards because more is better.
- Indifference Curve has a convex shape because of the diminishing marginal utility which states tthat marginal utility of an additional unit decreases.
Inferior goods:
It is a type of good in which the demand declines with a rise in income. Example:the demand for potato decreases as income increases because we prefer green vegetables at higher income.
Concept introduction:
Budget Line:
It is defined as the combination of all the goods that a consumer can purchase, exhausting all his income. The formula for the budget line is:
Here,
- is the quantity of good X.
- is the quantity of good Y.
- is the total income.
- is the price of good X.
- is the price of good Y.
Indifference Curve:
The line that shows the goods providing the same satisfaction level is known as the indifference curve.
The different properties of indifference curve are:
- Two indifference curve lines never intersect each other.
- The farther the Indifference Curve is from the origin the more utility it has.
- Indifference Curve slopes downwards because more is better.
- Indifference Curve has a convex shape because of the diminishing marginal utility which states tthat marginal utility of an additional unit decreases.
Inferior goods:
It is a type of good in which the demand declines with a rise in income. Example:the demand for potato decreases as income increases because we prefer green vegetables at higher income.
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