Before a consumer buys something, they think about the cost and the amount of satisfaction the purchase will givethem. They then compare the price and satisfaction of possible alternative purchases. In the end, they buy what gives them maximum satisfaction at the lowest cost. ![]() what will you buy from the kiosk? An important deciding factor is the amount have to spend. Economists call this your budget constraint. Bottles of water are two euros each chocolate bars arc one euro each. You could buy three bottles of water, or you could buy six chocolate bars. Or you buy any combination that adds up to your total budget. ![]() ![]() We can put all if this information on a budget line like the one in figure. The budget line shows what combinations of goods are possible.Įconomists call these combinations are bundles. Utilityis the economists' for the satisfaction we get from a purchase.īut when is the best bundle? This depends, on something called utility. Each good its own utility value for the consumer. The utility of abundle depends on two things: the utility of the goods in the bundle and how much of each good is in thebundle. ![]() This kind of chart is called an indifference curve.įigure 2 on page 25 shows the bundles of chocolate and water that give the same level of utility. Any point on the curvehas the same utility value as any other point.
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