Due date: Value: Note: Word limit: Tuesday 17 September 2013 This assignment is worth 10% of your final grade in this unit This assignment is an individual assignment 1000 words.
General assignment instructions
Read the task carefully and in your answer address the concepts and issues associated with each part of the task. Remember DO NOT PLAGIARISE.
Refer to the section “Q Manual” in your Unit Outline for assistance. You should use the APA system of referencing.
You must note the source of all information quoted directly – including equations and diagrams. You must also note the source of key ideas and information even if not quoted directly. A Reference List must be included with your answer. Failure to include a reference list will result in ZERO marks for the assessment.
Aim of the assignment
This assignment is designed to assess your ability to apply economic concepts to real world applications. It addresses the learning objectives from Weeks 2, 3, 4, 5 and 6.
Consider the following equation: MRSXY < PX/PY where
MRS = marginal rate of substitution x and y are two goods P = price < = is less than 3
Based on your study of consumer behaviour, 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 maximising satisfaction. Discuss in detail any adjustments which might take place, if the consumer is not currently maximising satisfaction when MRSXY < PX/PY. Using separate diagrams,