1. Combinations that yield equal level of satisfaction to Ahmad MangoesOrangesCombinations 306a 247b 208c 1410d 13e 815f 620g

2. Recap on Marginal Utility Analysis

3. Recap

4. Introductory Economic Lecture 5

5. a b c d e f g Oranges Mangoes 24 6 30 7 The indifference curve Bowed in towards the origin O

6. a b c d e f g Oranges Mangoes 24 6 30 7 The slope of indifference curve ∆ M ∆ O Slope = ∆ M = - 6 ∆ O Slope = marginal rate of substitution. O

7. Law of diminishing marginal utility a b c d e f g Oranges Mangoes As you consume more and more units of one good, you need to give up more and more units of other. Give up 5 mangoes & add 2 oranges Give up 6 mangoes & add 1 orange Give up 2 Mangoes & add 2 oranges O

8. a b c d e f g Oranges Mangoes MRS = Slope = MU o = - 6 MU m O MRS = Slope = MU o = - 1 MU m MRS = Slope = MU o = - 2 MU m Marginal utilities

9. O X O X Y Y Perfect compliments Perfect substitutes X = Pepsi Y = Coke X = Left shoe Y = Right shoe

10. An indifference map O Oranges Mangoes I 1 ( 360 utils) I 2 ( 430 utils) I 3 ( 500 utils) I 4 ( 650 utils) I 5 ( 780 utils)

11. Y X I1I1 I2I2 a b c e d O Impossible case of indifference curves

12. Budget of Rs 300, P X = 20, P Y = 10 Units of good XUnits of good YCombinations 030a 520b 10 c 150d

13. Budget line Infeasible area feasible area Y X a b c d

14. Equation of the budget line kX + lY = M M = total amount of money k & l = Prices of two goods Budget line in terms of Y = a + bX kX + lY = M lY = – kX + M Y = – k X + M l l M = intercept = 300 = 30 - K = P x = slope l 10 l P y

15. 40 30 1520 m n 16 ∆M Budget increases to 400 106 X Y Effect of increase in Income O Px = 20 Py = 10

16. Effect of fall in price 30 1520 106 X Y O Price of X falls 40 Price of Y falls From 20 per unit to 15 per unit From 10 per unit to 7.5 per unit

17. B1 B2 30 15 30 O X Y At B1 Price of X = 20 Price of Y = 10 At B2 Price of X falls to 10 Price of Y = 10