Answer to Question #171631 in Microeconomics for Dede Elizabeth

Question

Why is a likely to be worse off when a product that he or she consumes is ratoined

Answer 1

If the maximum quantity of a good is fixed by decree and desired quantities are not available for purchase, then there is no guarantee that the highest level of satisfaction can be achieved. The consumer will not be able to give up the consumption of other goods in order to obtain more of the rationed good. Only if the amount rationed is greater than the desired level of consumption can the consumer still maximize satisfaction without constraint.