Budget Line: It is defined as the combination of all 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 the more is better. Indifference Curve has a convex shape because of the diminishing marginal utility which states that the marginal utility of an additional unit decreases. Inferior goods : It is a type of a good in which the demand declines with a rise in the income. Example; the demand for potato decreases, as the income increases because we prefer green vegetables at higher incomes.

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Chapter 10, Problem 15P

To determine

Concept introduction:

Budget Line: It is defined as the combination of all 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 the more is better.

Indifference Curve has a convex shape because of the diminishing marginal utility which states that the marginal utility of an additional unit decreases.

Inferior goods: It is a type of a good in which the demand declines with a rise in the income. Example; the demand for potato decreases, as the income increases because we prefer green vegetables at higher incomes.

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