Essay on Economics

Economics
Name
Institution
Economics
Consumers are always faced with choices regarding the combination of goods that maximize their utility. The budget line and indifference curves(IC) will help a consumer in choosing a combination of commodities that will maximize his or her satisfaction. The budget line shows a combination of the goods given consumer’s income level and the product’s prices that will maximize utility. However, indifference curve shows a combination of the goods that maximize satisfaction. Therefore, given consumers’ budget for e-books and music album, consumers will pick combinations that will maximize their utility.
The concept of affordable points implies that consumers will only choose a combination of products that are within their budget. The combination of products at their income level is shown by the budget line. Therefore, any combination above the budget line is unattainable while a combination below the budget line is affordable but gives less satisfaction. Hence, consumers will operate within the budget line because they will receive greater satisfaction at the point. Considering our example, given a budget of $200, consumers will not attain IC I1 which is above the budget line. However, the points at the lower budget line are affordable, but give lower utility. Hence, consumers will prefer point ‘’B’’ to point ‘’A.’’
Indifference curves affect people’s choices. On the same indifference curve, consumers will be undecided on the combination that maximizes their utility. However, as the indifference curves shift to the right, consumers will receive ...