Economics ppt


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Economics ppt

  1. 1. RATIONING ANDINDIFFERENCE CURVESubmitted to:Ms. Anupreet Mavi
  2. 2. SITUATION UNDER CONSIDERATION Rationing of goods by the government {under what conditions } Act as a binding or a constraint on consumer choices And how it effects consumer welfare
  3. 3. RATIONING By definition , it is a fixed portion, especially an amount of food allotted to persons in military service or to civilians in times of scarcity at a lower price. Rationing is an artificial restriction of demand. Setting a lower price , in case of shortage, would prevent market price to drive very high. As high prices, especially in the case of necessities, are undesirable with regard to those who cannot afford them.
  4. 4. INDIFFERENCE CURVE An indifference curve captures combinations of commodities that yield the same level of satisfaction to the consumer. The consumer is , therefore , indifferent amongst these combinations.
  5. 5. INDIFFERENCE CURVE AND RATIONING The indifference curve method is used to make clear the problem arising from diverse systems of rationing. Rationing comprises of setting specific and equal quantities of commodities to each individual irrespective of the fact whether one receives more or less satisfaction from it.
  6. 6. CONDITIONS MAKING RATIONING ACONSTRAINT ON CONSUMER CHOICES Price Income Goods of necessities Non availability of goods rationed or their substitutes Consumer satisfaction
  7. 7. EFFECT OF RATIONING ON CONSUMERBEHAVIOUR Level of satisfaction y Commodity A IC2 IC IC1 o Commodity B x
  8. 8. EXAMPLE A consumer requires 4 kg. of wheat but is unable to buy it as he only has Rs. 40 and wheat is Rs.15 per kg. Govt. rations wheat at Rs. 10 per kg. and limits quantity to 4 kg. per head. Consumer will be able to buy in accordance with his requirement. Higher level of satisfaction A consumer requires 10 kg. of wheat and has the income to buy it. Govt. rations wheat at Rs. 10 per kg and limits quantity to 5 kg. per head. Consumer will be unable to buy in accordance with his requirement.
  9. 9. CONTI…. Shift in budget line y Example: A person has only Rs. 30p1 and rice is Rs. 15 per kg p Govt. rations its price at Rs. 10 per kg and quantity at 4 kg He earlier could buy only 2 o p p1 x kg but now will be able to buy 3 kg (real value of income changes)
  10. 10. RATIONING IN CONSUMER WELFARE Price control Real value of income increases Budget space increases Availability Level of satisfaction changes
  11. 11. The other, rather liberal scheme is to allow an individual more or less quantities of the rationed commodities according to his liking. It can be demonstrated with the help of indifference curve study that the last scheme is definitely better and beneficial than the former.