(a)[12]
Explain what is meant by a ‘consumer’s equilibrium position’ in indifference curve theory and how this concept can be used to construct a demand curve.
(b)[13]
One of the world’s earliest filmed singing commercials promoted a soft drink. It claimed that, at the same price, consumers would receive twice as much of that drink as they would of its main competitor’s version. This lowered its relative price and was comparable to a price cut. The rival then launched an advertising campaign claiming that its own drink was better than the first firm’s inferior product. Discuss whether diagrams from indifference curve theory can be used to show how a consumer might respond to these two advertising campaigns.