Question

Utility Analysis studies consumer’s equilibrium on the assumption that utility can be expressed in terms of units like 2, 4, and 6. Indifference Curve Analysis, on the other hand, assumes that utility cannot be expressed in terms of units; it can at best be compared. Does it mean that consumer’s equilibrium (in terms of consumption of goods X and Y) should be different, using different assumptions? State True or False.

• A. True
• B. False

Answer 1

The correct option is B False

Utility Analysis and Indifference Curve are simply the two techniques of analyzing consumer’s behavior. A rational consumer always maximizes his satisfaction, spending his given income across goods X and Y. The maximum level of satisfaction should be the same level of satisfaction, and it must mean the same level of consumption of goods X and Y, no matter by which technique we study the behavior.