Indifference Curve

Definition of utility

Postulate of utility maximization

Properties of IC

           The assumptions behind each property

       Convexity - DMRS

           Downward sloping - postulate of substitution

        No interception - axiom of transitivity

Shape of IC : bad Vs good

How will a budget line respond to a change in price / income

Determination of consumer optimization

Possibility of corner solution

Price effect ( graphical illustration )

Definition

-Substitution effect

-Income effect

- Normal good

- Inferior good

- Giffen good ( the Giffen paradox implied the demand law is asserted )

Application : subsidy in kind ( coupon / voucher ) Vs subsidy in cash