Indifference curve analysis has been dubbed as 'old wine in the new bottle'
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1) Old Wine in New Bottles:
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Professor Robertson does not find anything new in the indifference cure technique and regards it simply ‘the old wine in a new bottle’.
It substitutes the concept of preference for utility. It replaces introspective cardinalism by introspective ordinalism. Instead of the cardinal numbers such as 1, 2, 3, etc., ordinal numbers I, II, III, etc. are used to indicate consumer preferences. It substitutes marginal utility by marginal rate of substitution and the law of diminishing marginal utility by the principle of diminishing marginal rate of substitution.
Instead of Marshall’s proportionality rule or consumer’s equilibrium, which expresses the ratio of the marginal utility of a good to its price with that of another good, the indifference curve technique equates the marginal rate of substitution of one good for another to the price ratio of the two goods. Thus this technique fails to bring a positive change in the utility analysis and merely gives new names to the old concepts.
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Professor Robertson does not find anything new in the indifference cure technique and regards it simply ‘the old wine in a new bottle’.
It substitutes the concept of preference for utility. It replaces introspective cardinalism by introspective ordinalism. Instead of the cardinal numbers such as 1, 2, 3, etc., ordinal numbers I, II, III, etc. are used to indicate consumer preferences. It substitutes marginal utility by marginal rate of substitution and the law of diminishing marginal utility by the principle of diminishing marginal rate of substitution.
Instead of Marshall’s proportionality rule or consumer’s equilibrium, which expresses the ratio of the marginal utility of a good to its price with that of another good, the indifference curve technique equates the marginal rate of substitution of one good for another to the price ratio of the two goods. Thus this technique fails to bring a positive change in the utility analysis and merely gives new names to the old concepts.
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Indifference curve analysis is a graph that shows a point where two products offer the same utility to a consumer.
The indifference curve analysis is unfortunately dubbed as old wine in the new bottle as its results and assumptions are based on another economic theory known as the cardinal utility theory.
The theories and assumptions made on the indifference curve are derived from the cardinal utility theory only presented differently.
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