Suppose a consumer’s disposable income is Rs. 5,000/- per week and she has a choice of spending the income on concerts and meals. Assume meal is available for Rs.250/- each and concerts are available for Rs.500/- each. Prepare a table of possible combinations of meals and concerts that could be bought with the income. What is your observation about the values in the table?
Answers
Suppose a consumer’s disposable income is Rs. 5,000/- per week and she has a choice of spending the income on concerts and meals. Assume meal is available for Rs.250/- each and concerts are available for Rs.500/- each. Prepare a table of possible combinations of meals and concerts that could be bought with the income. What is your observation about the values in the table?
Number of days in a week = 7
Income for a week = Rs 5000
Number of Meal = M
Cost of Meal = 250M Rs
Number of concerts = C
Cost of Concerts = 500C
250M + 500C ≤ 5000
=> M + 2C ≤ 20
We will prepare a table with Maximum Buying capacity for given amount
Meals Concerts
0 10
1 9
2 9
3 8
4 8
5 7
6 7
7 6
8 6
9 5
10 5
11 4
12 4
13 3
14 3
15 2
16 2
17 1
18 1
19 0
20 0
Maximum 20 meals can be bought & maximum 10 concerts can be bought.
Number of Meals Should be bought in even number as buying number of Meals in odd number will have some amount left
Concerts and meals are two different products or services, and she can invest her income of Rs. 5000/- according to her needs and satisfaction.
Both the products can give her satisfaction and she needs to buy meals as her utility.
Here an indifferent curve may be defined as the locus of the points.
But it is better to invest higher amounts on meals because this is an utility and she can utilize her meals for a longer period.