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When the indifference curve is tangent to the budget constraint?
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What is the tangent between a budget constraint and an indifference curve on an indifference map?
It is the equilibrium point of utility maximization.
How the indifference curve and budget line apparatus are used to derive a consumer's demand curve?
Indifference curve: series of curve reflecting the preference structure of the individual. Budget constraint: the material resource constraint the individual faces in choices. The demand curve, being inherently designated as rational, seeks to maximise utility. Thus, in a Walrasian equilibrium, the consumer construct his demand curve at the points where his contract curve equals to his budget constraint (or, in mathematical terms, when the constraint and optimal indifferences are tangent to one another). These tangencies construct a curve which is the individual's demand function.
What is the relationship between indifference curve and budget constraint?
The tangency point of Indifference curve and budget line shows the Marginal Rate of Substitution between X and Y commodities. Consumer's equilibrium is achieved at that point.
How do you find the slope of an Indifference curve?
You find the tangent to the curve at the point of interest and then find the slope of the tangent.
What is difference between indifference curve and budget line?
budget line shows purchasing power of an consumer but indifference curve show willingness of consumer for two commodities.
What is the tangent between a budget constraint and an indifference curve on an indifference map?
It is the equilibrium point of utility maximization.
How the indifference curve and budget line apparatus are used to derive a consumer's demand curve?
Indifference curve: series of curve reflecting the preference structure of the individual. Budget constraint: the material resource constraint the individual faces in choices. The demand curve, being inherently designated as rational, seeks to maximise utility. Thus, in a Walrasian equilibrium, the consumer construct his demand curve at the points where his contract curve equals to his budget constraint (or, in mathematical terms, when the constraint and optimal indifferences are tangent to one another). These tangencies construct a curve which is the individual's demand function.
What is the relationship between indifference curve and budget constraint?
The tangency point of Indifference curve and budget line shows the Marginal Rate of Substitution between X and Y commodities. Consumer's equilibrium is achieved at that point.
What does budget line show and what are its two basic properties?
Budget line(bl) is tangent to the indifference curve(ic) the slope of bl is same as that of ic.
How do you find the slope of an Indifference curve?
You find the tangent to the curve at the point of interest and then find the slope of the tangent.
What is difference between indifference curve and budget line?
budget line shows purchasing power of an consumer but indifference curve show willingness of consumer for two commodities.
What is Consumer equilibrium under ordinal utility approach?
Consumer equilibrium is the point where consumer attains highest level of satisfaction. There are two conditions of equilibrium under ordinal approach 1- Necessary Condition: 'Budget line is tangent to the highest possible indifference curve.' 2- Sufficient Condition: 'At equilibrium, Indifference curve must be convex to the origin' Thus, at equilibrium , Px/Py (absolute slope of Budget line) = dy/dx (absolute slope of Indifference Curve) (In simple words, it'd determination of consumer's equilibrium with the help of Indifference curve.)
What is indifference Curve?
indifference curve is the graphical representation of the bundles of commodities for a given income level or budget that yields equal satisfaction at all the points.
What is indeference curve?
Indifference curve is a curve. A curve that is being intersected with the budget line. In order to show the maximum satisfaction. Dave Ono:
What is the different between indifference map and indiffirence curve?
Indifference curve is a curve that shows consumption bundles that give the consumer the same level of satisfaction. Indifference map, on the other hand Indifference curve is a graph of two or more indifference curves.
Features of indifference curve?
two indifference curve never cut each other..
What is shape of indifference curve?
what will be the shape of indifference curve if one of the two goods is a free commodity
