Which is at the point in between the budget line and the indifference curve?

The utility-maximizing choice along a budget constraint will be the point of tangency where the budget constraint touches an indifference curve at a single point. A change in the price of any good has two effects: a substitution effect and an income effect.

What is the slope of budget line equal to?

It is also important to remember that the slope of the budget line is equal to the ratio of the prices of two goods.

What does the point on budget line?

In terms of prices, a point on the Budget Line represents the ratio of price of the good shown on the X-axis to the price of the good shown on the Y-axis.

How many indifference curves can touch the budget line?

one indifference curve
Since an infinite number of indifference curves exist, even if only a few of them are drawn on any given diagram, there will always exist one indifference curve that touches the budget line at a single point of tangency.

What is equal at all points along an indifference curve for an individual consumer?

Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility. To the consumer, bundle A and B are the same as both of them give him the equal satisfaction. In other words, point A gives as much utility as point B to the individual.

Why is indifference curve downward sloping and convex to the origin?

Indifference curves are convex to the origin because as the consumer begins to increase his or her use of one good over another, the curve represents the marginal rate of substitution. The marginal rate of substitution goes down as the consumer gives up one good for another, so it is convex to the origin.

Why the budget line is downward sloping explain?

The budget line is downward sloping because a consumer can increase the consumption of good 1 only by decreasing the consumption of good 2. The slope of the budget line is – P1/P2 = Δx2/Δx1 which implies the rate of exchange or the rate at which good 2 can be substituted for good 1.

What is slope of indifference curve?

The slope of the indifference curve is the marginal rate of substitution (MRS). The MRS is the amount of a good that a consumer is willing to give up for a unit of another good, without any change in utility.

Why is budget line important in indifference curve analysis?

We assume that each consumer seeks the highest indifference curve possible. The budget line gives the combinations of two goods that the consumer can purchase with a given budget.

What is indifference curve explain the importance of indifference curve?

Definition: An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.