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 the consumer’s ability to pay and purchase. Here we will explain the meaning […]
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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 preference, money income, and prices are important factors affecting consumers’ objective of utility optimization. A consumer’s preference for goods and services directly changes with the change in income of the consumer
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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 bundles of two goods on an indifference curve as they
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The key purpose of the analysis of consumer behavior is to derive a consumer demand curve. Here we will discuss the derivation of the demand curve under cardinal utility analysis in the case of one commodity and case of two commodities. Learning Objective To deal with the derivation of the demand curve under cardinal utility
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Meaning of Consumer’s Equilibrium Consumer’s equilibrium is the position in which the consumer reaches the highest level of satisfaction given his or her money income and the prices of goods. It means a consumer is said to be in equilibrium when he/she can maximize his/her utility with the given limited resources. At the consumer’s equilibrium
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Learning Objective To discuss the concept of the scientific paradigm of economics According to Wikipedia, the paradigm is a distinct set of concepts; thought patterns, including theories, research methods, postulates, and standards for what constitutes legitimate contributions to a field. Paradigm is a means of looking at something. In such a sense new paradigm means
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The article will discuss the meaning and some key importance of assumptions, hypothesis, and empiricism in the study of economics. Meaning of Assumptions in Economics Economists apply assumptions to split down composite and complex economic phenomena and processes and advocate different theories to recognize and understand different economic variables. Assumption can be defined as some
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Concept of Elasticity of Demand The law of demand explains that the quantity demanded of a commodity is affected considerably by the price of the product. But the law of demand only tells us about the direction of change in demand for a commodity in response to a change in its price. After studying the
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If the market is free then there are no government interventions and prices and quantities adjust with the market forces of demand and supply. At the equilibrium price, the quantity that consumers are willing to buy exactly equals the quantity that sellers are ready to sell in the market. In economics, this is an efficient
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Introduction to Induction and Deduction There are two methods of reasoning the deductive method and the inductive method. Both the methods are forms of logic that help to establish the truth. It means generalization can be drawn by using these two methods. During scientific reasoning, true logic can be stressed through deduction as well as
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