Question

Q22. With the given income, the consumer is purchasing enough to feed his
family but due to shortage of supply, the food grains becomes more costly
(cost of other goods remains constant). Explain the impact of this on budget line of the consumer​

Answer 1

Explanation:

Consumers analyze the optimal way in which to leverage their purchasing power to maximize their utility and minimize opportunity costs through employing trade -offs.

The way economists demonstrate this arithmetically and visually is through generating budget curves and indifference curves.

Budget curves indicate the relationship between two goods relative to opportunity costs, which defines the value of each good relative to one another.

Indifference curves underline the way in which a given consumer interprets the value of each good relative to one another, demonstrating how much of ‘good

x

‘ is equivalent in utility to a certain quantity of ‘good

y

‘ (and vice versa).

Through utilizing these economic tools, economists can predict consumer behavior and consumers can maximize their overall utility based upon their budget constraints.