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Unformatted text preview: 4. One way oF modelling consumer behaviour is to think that a consumer will try to maximise their beneft or uTlity From the consumpTon bundle they buy. Let a consumer’s uTlity From consuming x1 units oF good 1 and x2 units oF good 2 is given by U = x1.x2. (x1 and x2 are greater than 0). Now consider the consumer has a uTlity oF 10. Draw the combinaTons oF x1 and x2 that can achieve this outcome. Do the same For U = 20 and U = 25. Interpret these curves. (Note, these curves are called Indi±erence Curves). What does the slope oF the indi±erence curve mean? Remember the budget constraint For a consumer is p1.x1 + p2.x2 = M, where p1 and p2 are the prices oF goods 1 and 2, and M is her income. Draw this curve on your diagram. What consumpTon bundle will the consumer choose? Interpret your result. Additonal questons: 5. QuesTon 3 on page 20607 oF the text 6. QuesTon 5 on page 207 oF the text....
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 One '14
 Economics, Supply And Demand, 6 days, 300 tons

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