Question 4:

"A consumer's goal is to get maximum satisfaction out of his consumption.The consumer will buy the affordable combination of goods and services that make him as well off as possible, shown by indifference curves.His consumption choices are constrained by his income and the prices of the goods and services available."

(a)Clearly explain the following:

(i)Budget line and factors affecting the budget line.

(ii)Indifference curves and characteristics of indifference curves.

(30 marks)

(b)Discuss consumer equilibrium using budget line and indifference curves.

(40 marks)

(c)Demonstrate how consumers derived their utility maximization by using the marginal utility per dollar approach.

(30 marks)