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Based on your study of consumer behavior, draw an indifference curve budget line diagram to illustrate the position for the consumer as given in the equation above. Fully explain the theory and relationships depicted in the diagram. Include explanations of consumer preferences, budget constraints, and the slopes of the curves. Use the diagram to explain whether the consumer is maximizing satisfaction.
Discuss in detail any adjustments which might take place, if the consumer is not currently maximizing satisfaction when MARRY Make sure you note the source of all diagrams and equations. Task 3 Select a product, good or service. Is the demand for this product elastic or inelastic? Is the supply of this product elastic or inelastic? Explain briefly. Task 4 Assume the government imposes a tax on the production of your chosen product/s. Use a market diagram for each product (demand and supply curves combined) to explain the impact of the tax on the following: consumer and producer surplus (pre and post tax) burden of the tax government revenue impact on overall social welfare.
Mark allocation 1 5 marks (2 marks) Marking Criteria Task 1 . Consumer Choice Diagram to illustrate equation – fully labeled and accurate. Explanation of the theory and relationships depicted in the diagram 0 0 0 consumer preferences budget constraints slopes of the curves. (2 marks) (2 marks) (2 marks) Explanation of whether or not the consumer is maximizing satisfaction – must closely relate explanation and diagram and explain any necessary adjustments. Explanation of the link between consumer choice and individual demand – must be closely linked to appropriate diagrams. 3 marks) (4 marks) 4 Task 2: Explanation of theory of price elasticity of demand. Includes: 0 0 0 definition, elastic, unit elastic and inelastic price elasticity of demand calculation of price elasticity – equations (point method and mid-point method) use of diagrams to explain the theory. 10 marks (4 marks) (2 marks) (4 marks) Task 3: Clearly identifying whether or not demand/supply for the product is elastic, inelastic or unit elastic. Task 4: Explanation of the impact of imposing a tax on the production of chosen product.
Includes: 0 0 drawing a fully labeled market diagram for the product with appropriate slope for the demand/supply curves (linked to dated elasticity) discussion and illustration on diagram, where applicable, of effects of the tax on: 0 0 0 0 0 consumer and producer surplus (pre and post tax) burden of the tax government revenue impact on overall social welfare 1 mark 14 marks (2 marks) (2 marks) (2 marks) (2 marks) (2 marks) definition of key terms: 0 0 0 consumer and producer surplus tax burden deadweight loss (2 marks) (1 mark) (1 mark) Mandatory to receive a mark for the assignment Use of appropriate referencing – for direct quotes, key points taken from the text or other sources but not quoted directly, use of data, equations and diagrams etc.