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Define A consumer prefers a higher indifference curve to a lower one.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

ChapterE: Budget Constraint And Indifference Curve Analysis

Section: Chapter Questions

Problem 3QP

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How do indifference curves represent the consumer's preferences?
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In analyzing consumer behavior, economists often use indifference curves to represent a consumer's preferences. An indifference curve shows the different combinations of two goods that provide the same level of utility to the consumer. As one moves along an indifference curve, the level of utility reflecting the consumer's willingness to trade off one good for another while maintaining the same level of overall satisfaction. A) Increases B) Decreases C) Remains constant D) Fluctuates unpredictably
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Given above are some of the indifference curves for a student who consumes Burritos and Pizzas and the relevant budget line. Equilibrium is defined as the maximum utility or satisfaction given the consumer’s budget. The consumer has more indifference curves above I3, below I1, and between I1 and I2 and between I2 and I3. Out of all the indifference curves the consumer has, only I1, I2, and I3 are shown. The given budget line touches I2 at the point where I2 touches the y-axis (Burritos axis). (a) What is the point of consumer equilibrium in the above graph where the consumer is maximizing utility (satisfaction) given the budget line. Please show the point and label it as “A”. (b) At the equilibrium point how much Pizza does the student consume? (c) If the price of Pizzas decreased and the price of Burritos remained unchanged, would the quantity of Pizzas consumed at equilibrium increase or decrease compared to the equilibrium point A in the graph given above? (d) If the…