Posted by Anonymous on .
I need help with question, we havent covered this topic yet and i wanted to push ahead. Thanks.
'Consumers maximise utility subject to a budget constraint. Firms maximise output
subject to a cost constraint'.
Outline how the analysis of the firm's behaviour in terms of isoquant and isocost analysis
parallels the analysis of consumer behaviour in terms of indifference curve and budget
To what extent does this type of analysis indicate the meaning of the basic economic
Whew, one could write a thesis on just your question.
To answer, start with certain fundamental precepts. 1) consumers what to maximize their utility, 2) Producers want to maximize economic profits, 3) the basic economic problem is a study of how scarce resources are allocated.
Be sure you understand what an isoquant curve is and represents.
Repost if you have a specific question, or would like a critique of your response.
What does isoquant/isocost & indifference curve and budget constraint analysis have in common? I know that they both 'look' similar & both strive to find the same things "consumers want utility" & "producers want eco profits" (maximising both).
What other things do they have in common? I'm kind of flat out.
What exactly are the roles of price in a market economy?
Is it measure of value, store of value, currency for exchange, price determines quantity demanded?
What else should I add to this list? Any ideas?