Chapter 10.A, Problem 15P

To determine

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.

To determine

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.

To determine

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.