(a)[12]
Explain what is meant by a ‘consumer’s equilibrium position’ in indifference curve theory and how this can help in deriving a demand curve.
(b)[13]
One of the world’s first filmed singing commercials promoted a soft drink. It said that, at the same price, consumers would receive twice as much of that drink as of its main rival. This made it cheaper and was comparable to a price reduction. 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.