Comparative Analysis Of Consumption With Indifference Curve Approach At Different Prices

University:
Elon University
Course:
ECO 1000: Economics
Academic year:

2023
Views:

291

Pages:

2
Author:

MCerah

Comparative Analysis of Consumption with Indifference Curve Approach at Different Prices Simulation table of consumer behavior with the marginal utility (MU) approach Px Py M x y MUx MUy Umax 10 8 80 3,6 5,5 18,5 14,8 108,6 8 8 80 4,7 5,3 17,9 18,1 125,33 14 8 80 2,4 5,8 19,4 11,2 89.8 10 12 80 3,7 3,6 16 15 98,4 10 5 80 3,5 9 29 14,5 157,5 6 8 80 6,4 5,2 17,6 23,2 153,4 10 8 100 4,6 6,75 22,25 17,8 149,35 Draw an analysis of consumer behavior and its description with the Indifference Curve approach, namely Based on the simulation table of each student as follows: a. Px and M ceteris paribus, Py increases ANSWER a. Consumer behavior analysis using the IC approach with Px and M ceteris paribus, Py rises: Px = 10; M = 80; Py = 12 Y1 = 5. 5M/Py = 10 X1 = 3. 6M/Px = 8 Y2 = 3.6M/P 'y = 6.7 X2 = 3,7 y 10 6,7 5,5 3,6 x 3,6 3, 78 Explanation: From the curve above, it can be seen that, as Py increases, the consumption power of X and Y changes. Initially, the consumption of good X is 3.6 and the consumption of good Y is 5.5. Then, the consumption of good X changes to 3.7 and the consumption of good Y to 3.6. This happens because of a change in the price of good Y, the incident is in accordance with the law of demand, namely if the price increases, the demand decreases. From this case, the quantity of good Y decreases due to an increase in price, while the quantity of good Y decreases due to an increase in price. The quantity of good X increases due to the effect of the price of good Y. The budget line also changes when Py increases. From the curve above, it is known that IC 1 is located above IC 2, which means that IC 1 satisfaction is higher than IC 2 satisfaction. So, if Py is increased, it can result in a decrease in satisfaction and a decrease in purchases of good Y.