Indifference curves analysis has revolutionised the way modern economists analyse consumer behaviour. a) With the aid...

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Indifference curves analysis has revolutionised the way modern economists analyse consumer behaviour. a) With the aid of a relevant diagram explain what you understand by indifference curves in consumer theory. 4 Marks b) Explain using clearly labelled graphs how a utility maximising consumer with two commodities x and y attains equilibrium under ordinal utility analysis. 5 Marks c) State and explain the assumptions of a perfectly competitive market model 6 Marks d) Distinguish between the following economics terms: i. Marginal rate of technical substitution and marginal rate of commodity substitution. 2 Marks ii. Primary utility function and indirect utility function 2 Marks Economic cost and accounting cost 2 Marks iv. Pareto efficiency and production efficiency 2 Marks V. Shortrun and Longrun Analysis 2 Marks Indifference curves analysis has revolutionised the way modern economists analyse consumer behaviour. a) With the aid of a relevant diagram explain what you understand by indifference curves in consumer theory. 4 Marks b) Explain using clearly labelled graphs how a utility maximising consumer with two commodities x and y attains equilibrium under ordinal utility analysis. 5 Marks c) State and explain the assumptions of a perfectly competitive market model 6 Marks d) Distinguish between the following economics terms: i. Marginal rate of technical substitution and marginal rate of commodity substitution. 2 Marks ii. Primary utility function and indirect utility function 2 Marks Economic cost and accounting cost 2 Marks iv. Pareto efficiency and production efficiency 2 Marks V. Shortrun and Longrun Analysis 2 Marks

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a Indifference curves in consumer theory represent the various combinations of two goods x and y that provide the consumer with the same level of sati... View the full answer