Economics and N.Z. households

Today we are looking at companies who supply elctricity to households within our economy. Part (a) of our assignment requires us to draw a budget line for an average household labeling the intercepts and the slope of the budget line. Please refer to the following diagram.

The above diagram illustrates that at point ‘A’ the average household consumes majority of all other goods but little electricity. At point ‘B’ the household begins to use a fair amount or more electricity but no other good

that there is an increase in the price of electricity. The new budget line which represents the average household takes a move inward therefore making it steeper. There is a price effect where as the price for electricity increases, the usage of electricity decreases. We can begin to see that the average household will be neither better off nor worse off after the change. Part (c) asks to now consider a household with the same income as the average household, but with preferences that favour more electricity consumption than the average housdehold.

Some topics in this essay:
Budget Line, , average household, budget line, rationally choose, household rationally choose, household rationally, worse change, price electricity, consumption average, diagram diagram, indifference curves, consumption average household, †budget line, please refer, refer diagram diagram, please refer diagram,