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THEORY OF COSUMER BEHAVIOUR: BASIC THEMES:
We elaborated two classical theories (viz. Cardinal Approach and Ordinal Approach). In ordinal approach discussing the indifference curve theory we show that indifference curve in general is downward sloping and strictly convex to the origin. Consumer equilibrium in ordinal approach was found out both graphically and algebrically. In the ordinal approach at equilibrium two condition must satisfied. The first condition is the equality between slope of the indifference curve and slope of the budget line, which indicates that at equilibrium slope of the budget line must be equal to slope of the indifference curve.
The second condition shows that at equilibrium budget constraint must satisfy with equality sign, i.e., consumer spends all her income in consumption. This condition is derived from the assumption of non-satiation of all goods. The income effect and substitution effect have been presented and meanings explained. An income effect is the change in consumer demand due to unit change in income when other things are held constant and substitution effect is the change in consumer demand due to change in prices of any one good, the utility and other things remaining unchanged. In the next section, we discussed the Slutsky's theorem, which is the relationship between price effect, income effect and substitution effect. It shows that price effect is the sum of substitution effect and income effect. Finally, we discussed the compensated demand curve analysis derived by Hicks.
Johnson Farms owns valuable farm land that allows it to produce wheat at a lower cost than its competitors. The company reports large profits each year on its accounting statements
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What is the difference between MRTS & MRS?
1. The marginal benefit (demand) curve for pollution for an industry is P=100-4*Q, where Q is emissions in tons. The current emissions tax (price) for pollution is $40/ton. Regu
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For the pizza seller whose marginal, average variable, and average total cost curves are shown in the graph below, what is the profit-maximizing level of output and how much profit
maximum profits will occur at the output level
Policy Implications: The expansion of the services sector has wider implications for population, employment, and trade prospects of the economy, some of which are as follows:
The definition of a price maker is a "firm with some power to set the price because the demand curve for its output slopes downward", which in effect, means those firms with a down
Capitalist Economy: Under capitalist economy factors of production are owned and managed by private entrepreneurs. Production takes place on. the initiative an enterprise of the pe
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