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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.
Ask quesThe market demand for brand X has been estimated as Qx = 1,500 - 3Px - 0.05I - 2.5Py + 7.5Pz where Px is the price of brand X, I is per-capita income, Py is the price of
Demand Pull Inflation and Cost-Push Inflation: Demand Pull Inflation: It describes a sustained increase in the general price level that is caused by a permanent increase in n
compare the concept of MRTS with the MRS and discuss the similarities and difference between them?
RECENT DEVELOPMENT IN DEMAND ANALYSIS: For many years economic theorists analysed the optimal behaviour of consumers while econometricians estimated consumer demand and expend
NETWORK EXTERNALITIES Till this point we have assumed that people's demands for good are independent of each other. Actually, a person's demand can be affected by the number
Variable and Total cost curve * Consequently (from the table which is given): - MC initially decreases with increasing returns 0 through 4 units of output
prove that marginal utility of x=the price of commodity x.
How many half-lives are required for the concentration of reactant to decrease to 1.56% of its original value?
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Structure of benzene
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