Question

1 using indifference curve analysis shows how does a consumer maximize his/her utility? explain the underlying principle of utility maximization

2 what is the principle of the marginal rate of substitution MRS? draw a set of indifference curves for which MRS is constant between two products MRS is zero

3 using indifference curve analysis show and explain the income effect and substitution effect due to price change of a product {assume a priced fall of product on the x_axis}

Answer 1

1. A consumer has maximized his/her utility by consuming bundle of goods where budget line is tangent with the indifference curve.

The principle of utility maximization is consumers attempt to get the greatest value that is the highest utility possible from the expenditure of least amount of money. Their objective is to maximize the total value derived from the available income.