Suppose you have a fixed budget of 3,000 per year to spend on food and music. The price of food is $1 per pound , and the price of music is $10 per CD. You currently spend $2,400 on food and 600 on music. If want to knowif you are spending your money wisely what question should you ask yourself?
How could you spend less on CDs and more on tapes.
2007-03-24 13:00:55 · 2 answers · asked by Anonymous in Social Science ➔ Economics
diagramatically speaking , you need to construct indifference curve which is the indication or measurement of your satisfaction over the given budget.you need to make sure that your MRS(MARGINAL RATE OF SUBSITUTION ) should =price ratio of 2 goods for maximixation of satisfaction.Any movement of your IC is allowed but make sure it equals price ratio.
2007-03-25 02:13:08 · answer #1 · answered by SS 2 · 0⤊ 0⤋
You would have to see if you were "satified" with the music you have and if you are satisfied with the food you have eaten?
If you are more satisfied in one and not the other, then you need to re-allocate.
2007-03-24 13:25:21 · answer #2 · answered by Santa Barbara 7 · 0⤊ 0⤋