Answer to Question #236938 in Marketing for Suneha Krishanna

Question

1.   Consider two types of raw food materials (Item A and Item B) that can be used to meet the same nourishment needs. Both items can be used to produce wants as well. The wants that Item A can be turned into can be sold for much higher prices than the wants Item B can be turned into. How will these products likely be used for meeting the needs and wants of society?

Answer 1

Points on a budget constraint represent combinations of the goods that exactly use up income b. Points within the budget constraint represent combinations of the goods that do not use up all the income. If item A and B lie on the budget constraint, we can deduce that people will be indifferent between the two . If the price of one good decreases, all else the same, the budget constraint will swivel or rotate outward