Show that the equilibrium condition and consumerequilibriumunder both cardinal and ordinalutilitytheory are identical.
They both assume that the consumer is rational.
Consumerequilibrium, undercardinalutilitytheory, is achieved when the sufficient condition is met. That is, the...
concept of consumerequilibriumunder the cardinalutilitytheory?
(b) Explain how a demand curve is derived under the cardinalutilitytheory
3 Although water is essential to human life, it is cheaper than silver. Explain paradox.
4 what are the assumptions of the cardinal utlity theory?
After going through this chapter you shall be able to understand the following concepts
Consumer Behaviour Theory- Ordinal Approach and Cardinal Approach
Total Utility, Marginal Utility, Relationship between Total Utility and Marginal Utility
Law of Diminishing Marginal Utility...
GRAPH 2.3: Graph Shows the dot where Option A and option B for apples has been chosen.
3.0: DIFFERENCES BETWEEN CARDINAL AND ORDINALUTILITYTHEORIES
What are the differences between cardinal and ordinaltheories? The main differences between cardinal and ordinaltheory can be explained by the...
determine the order of preference among the different goods. The main ordinal approach theories are the indifference curve and revealed preference theories.
The consumer is assumed to be rational. i.e. he aims to maximize his...
diminishing marginal utility applies to consumer behavior.
THEORIES OF CONSUMER BEHAVIOR
a) Cardinal/Neo-classical utilitytheory
The theory holds that utility derived from consumption of a good or service is measurable subjectively using cardinal numbers (e.g. 1, 2, 3 …) by units of...
(a) What is the difference between ordinalutility and cardinalutility?
(b) Explain why the assumption of cardinalutility is not needed in order to rank consumer preferences.
(c) State the basic assumptions regarding consumer preferences. Briefly clarify the meaning of each of those...
In general, there are two approaches of utility, which are cardinalutility and ordinalutility. Utility in cardinal approach can be measured by using the unit ‘utils’. The level of utility usually depends on the consumer willingness to pay. However, in ordinal approach...
THE THEORY OF CONSUMER BEHAVIOR
• Derivation of Demand curve
• Marginal rate of Substitution
• Optimum Consumer
• Income Consumption
• Price Consumption Curve
• Elasticity of Demand...
and explain the behavior of a consumer, however they can be categorized in to two:
Cardinalutilitytheory:- it argues that a consumer has the capacity to measure the level of satisfaction that she derives from consumption of a given quantity of a commodity.
Ordinalutilitytheory:- it argues...
) Utility, usefulness and pleasure
(v) Utility is Abstract
There are two approaches for measurement of utility :
(i) Measurement of utility in terms of money is called CardinalUtility
Approach. The amount of money which a consumer is prepared to pay for a commodity in the indirect...
UtilityUtility is a theory in economics that measures the satisfaction one gains from consumer a good/product.
CardinalUtility Vs OrdinalUtilityCardinalUtility - measured in Utils
OrdinalUtility – according to preference
Law of Diminishing Marginal Utility
The more we have of a...
Behaviour. Utility analysis: Cardinal and Ordinalutility, Equi-marginal utility. Indifference curve and its properties. ConsumerEquilibrium with Cardinal and Ordinal approach, Consumer surplus, Price, Income and Cross Elasticities of Demand. Production Theory: Production Functions with one variable...
such elasticities can be done exactly in the same way as for the price or income elasticities.
THEORY OF CONSUMER BEHAVIOUR
The basic material relating to demand, supply and market equilibrium has been presented in Chapter – 3.
The demand side of...
. Description and Explanation of Cardinal and OrdinalUtility
2.1. CardinalUtilityTheory 3
2.2. OrdinalUtilityTheory 5
3. Differences between Cardinal and OrdinalUtilityTheories
3.1. Measurement Of Satisfaction 12
3.2. Numbers 12
3.3. Valuation of Satisfaction 13...
· Economic methodology
· Distinction between microeconomics and macroeconomics
Topic 2: The price theory
· Theory of demand
· Theory of supply
· The concept of equilibrium
· Application of price theory
Topic 3: Theory of the consumer
· The cardinalutilitytheory
· The ordinal...
different ways: (1) CardinalUtility Analysis and (2) OrdinalUtility Analysis Accordingly, we shall examine these two approaches to the study of consumer s equilibrium in greater defait. Utility Analysis or Cardinal Approach : The Cardinal Approach to the theory of consumer behaviour is based upon the...
and curves. Market equilibrium.
* Consumer behavior and rational choice: cardinal and ordinal approaches of consumerutility.
* Maximization of consumerutility by the technique of indifference curves and budget lines.
* Corner solution and consumer surplus. International convergence of...
utility (satisfaction) but will have to fall to the combination that he can afford. This can be illustrated by a diagram as below based on the concept of consumer indifference.
In the diagram above, the blue line is the budget line. It shows the different quantities the...