Question

Give at Least two example of application of indifference curve technique in Context managerial Economic.

Answer 1

Indifference curve with considering two products , is a graph represents the combinations of those which gave equal satisfaction to the consumer. Budget limitations and choices or preference of the buyers id depicted in the curve. In managerial economics indifference curve technique have many applications and it is considered as handy tool in the process of analysis. . The technique can be used to calculate the effects of government subsidy on individuals with low income. In Business firms have to take many decisions. Market demands should be analyzed before the production in order to gain success. Here indifference curve has a significant role to identify consumer needs.

For example , if a farmer is searching for a proper crop which benefit him more from two alternative choices. It is determined by the potential profit, market demand, and the cost of production. The preferred choice can here found from the point on the graph where profit is maximum.

another example , For buy a raincoat in order to gain utility for a buyer then if another choice gain little , so the curve is used as every points on the curve give same level of satisfaction. So in accordingly by analyzing the curve for each level corresponding products can be produced.