EXPLAIN CARDINAL UTILITY.
2. WHAT IS ORDINAL UTILITY?
3. EXPLAIN MARGINAL UTILITY.
4. DEFINE CONSUMER'S EQUILIBRIUM.
5. WIRTE A SHORT NOTE ON BUDGET LINE.
6. EXPLAIN MRS.
7. DESCRIBE INDIFFERENCE MAP.
8. DEFINE INDIFFERENCE CURVE.
9. EXPLAIN TOTAL UTILITY.
10. DEFINE UTIITY.
Answers
Answer:
•Approaches to study the consumer behaviour.
how do consumers behave?purchase less at a
higher price&more at a lower price.
•why do they behave like this?Cardinal utility
approach attempts to find the answer to this
using the concept of utility.
•Utility is the want in satisfying power of a
commodity. E.g. Wants to consume apple not
banana. Therefore he will consume only apple
and not banana.
•Ordinal Utility
In ordinal utility,the consumer only ranks
choices in terms of preference but we do
not give exact numerical figures for utility.
For example,we prefer a BMW car to a
Nissan car, but we don't say by how much.
It is argued this is more relevant in the real
world. When deciding where to go for lunch,
we may just decide I prefer an Ilalian restaurant
to Chinese.We don't calculate the exact levels of
utility.
Carl Menger, an Austrian economist,developed
concepts of utility which rested on ranked
preferences.
In 1906 Vilfred Pareto in 1906 concentrated
on an indifference curve map. This placed
Preferences on bundles of goods but did not
attempt to say how much.
Cardinal Utility- It explain that the satisfaction level
after consuming a good or service can be scaled in
terms of countable numbers.
Ordinal Utility- It explains that the satisfaction after
consuming a good for service can not be scaled in
numbers,however,these things can arranged in the
order of preference.
Ex-Sam submit,he gets more satisfaction from Pizzas
as compare to the burger.
Explanation:
1. Cardinal Utility is the idea that economic welfare can be directly observable and be given a value.
2. An ordinal utility function is a function representing the preferences of an agent on an ordinal scale.
3. Marginal Utility is the satisfaction or benefit derived by consuming a product; thus the marginal utility of a good or service is the change in the utility from an increase in the consumption of that good or service.
4. Consumer's equilibrium is a situation when he spends his given income on the purchase of one or more commodities in such a way that he gets maximum satisfaction and has no urge to change this level of consumption, given the prices of commodities.
5.A budget constraint represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income.
6. The marginal rate of substitution is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility. At equilibrium consumption levels, marginal rates of substitution are identical.
7. An indifference map is a combination of indifference curves, which allows understanding how changes in the quantity or the type of goods may change consumption patterns.
8. An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.
9. Total utility is the total satisfaction received from consuming a given total quantity of a good or service, while marginal utility is the satisfaction gained from consuming an additional quantity of that item.
10. Utility is a term in economics that refers to the total satisfaction received from consuming a good or service. Economic theories based on rational choice usually assume that consumers will strive to maximize their utility.