Page 151 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes
Table 1: Characteristics of various varieties of apples
Variety Sweetness Juiciness
A 6 2
B 4 4
C 2 5

In Fig. 7.6, sweetness and juiciness are measured on vertical axis and horizontal axis respectively. If
every variety of apple’s characteristics is shown in table, then a variety of more quantities will provide
combination of represented characteristics by the rays of OA, OB and OC to the customer in figure.
On given customer’s income and price of every variety of apple, let customer buy OX quantity of
A or OY quantity of B or OZ quantity of C. By joining X and Y and Y and Z points customer can do
different mixture consumption of combination of both the qualities of different quantities of three
varieties of apple. XY line is customer’s budget line or attributes possibility frontier or efficiency
frontier which represents those combinations which the customer can obtain by spending his income
on different mixtures of A and B varieties of apple. It is similar for YZ budget line, which is related
to B and C varieties. This way, budget line XYZ represents the different combinations of both the
characteristics, which the customer can obtain on given prices of all the three varieties of apple and
his income.

Fig. 7.7

A
B
Sweetness

X Y C
E I 3
N
I
2
Z
I
1
F
M
G

O K L Juiciness

Pointed line between X and Z shows two combinations between two specialities when consumer
can obtain by expenditure of combination of A and C brands because this line XZ situated is below
line XYZ. So consumer receives less quantities even after expenditure of same income in comparison of
others coincidence on both specialities. So a clever consumer will avoid this situation.

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