Microeconomics

Application and Uses of Indifference Curve

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 »

Decomposition of Price Effect into Substitution and Income Effects

Different factors directly affect the consumer’s equilibrium condition, including change 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 consumer’s equilibrium from one point …

Decomposition of Price Effect into Substitution and Income Effects Read More »

Income Effect and Income Consumption Curve

The income of the consumer is also one of the major factors affecting the consumer’s equilibrium or objective of utility maximization. Consumer’s purchase decision of goods and services changes with the change in his/her income size because the size of income defines consumer’s ability to pay and purchase. Here we will explain the meaning of …

Income Effect and Income Consumption Curve Read More »

Price Effect and Price Consumption Curve

Consumer’s equilibrium is derived under ordinal utility analysis with the assumption of constant money income and prices of the goods. But in reality, consumer’s preference, money income, and prices are important factors affecting consumer’s objective of utility optimization. Consumer’s preference for goods and services directly changes with the change in income of the consumer and …

Price Effect and Price Consumption Curve Read More »

Assumptions and Properties of Indifference Curve

Concept of Indifference Curve (IC) In the microeconomic analysis, an indifference curve (IC) is a graph that shows different combinations of two goods or services that provides the same level of total satisfaction to the consumers. A consumer is always indifferent among any of the boundless of two goods on an indifference curve as they …

Assumptions and Properties of Indifference Curve Read More »

Don`t copy text!