Learning Objective To explain the similarities and differences between cardinal and ordinal utility analysis (cardinal utility versus ordinal utility) Ordinal utility analysis is considered the improved form of cardinal utility analysis and is also considered a superior method to study consumer’s behavior. Indifference curve analysis is more objective, more scientific, and more applicable because […]
Cardinal Utility Versus Ordinal Utility Read More »
Besides the analysis of consumer behavior and consumer demand, the technique of the indifference curve can be used in the analysis of several other economic phenomena and issues. Mainly the technique of indifference curves is applied in the areas like consumer’s surplus, the individual labor supply curve, numerous doctrines of welfare economics, the burden of
Application and Uses of Indifference Curve Read More »
Learning Objective To explain the derivation of the demand curve with help of the price consumption curve (Price effect and derivation of the demand curve) The price effect is defined as the change in quantity demanded of a commodity due to a change in its price, assuming the price of other goods and the income
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Different factors directly affect the consumer’s equilibrium condition, including changes in the price of one good, the price of other goods, and money income. It means a change in the price of the goods; the price of other goods and the money income of the consumer brings a change in the consumer’s equilibrium from one
Decomposition of Price Effect into Substitution and Income Effects Read More »