1 Explain why the consumer will not choose the consumption b

1. Explain why the consumer will not choose the consumption bundle at point v. Malt 2. Explain why the consumer will not choose the consumption bundle at point z IC IC2 3. Explain why the consumer will choose the consumption bundle at point x IC Hops 1. Identify the point of consumer equilibrium and label it X. Mark the original consumption levels for both goods 2. Draw a new budget line and label it B\'B\', such that the consumer will now specialize in consuming the other good Describe the change in market conditions that this represents oin chips IC Potato chips

Solution

Ans for 3)

In diagram we have 3 Indifference curves indicalting 3 different utlity levels

Hence chronologically IC3>IC2>IC1 i.e utlitly derived out of IC3>utlitly derived out of IC2>utlitly derived out of IC1

Given budget line BB consumer can always go for higher utlity for which IC is tangent to budget line

Therefore consumer will never choose v as he will derive utlitly from IC1 where he can easily attain utility from iC2

Consumer can not attain point z as due to budget constraints hence though he wishes to but unable to attain z due to less income

The only consumption point achievable is point x as it is the only tangency point between IC and Budget line