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when does consumer attain equilibrium under the utility approach
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What is Consumer equilibrium under ordinal utility approach?
Consumer equilibrium is the point where consumer attains highest level of satisfaction. There are two conditions of equilibrium under ordinal approach 1- Necessary Condition: 'Budget line is tangent to the highest possible indifference curve.' 2- Sufficient Condition: 'At equilibrium, Indifference curve must be convex to the origin' Thus, at equilibrium , Px/Py (absolute slope of Budget line) = dy/dx (absolute slope of Indifference Curve) (In simple words, it'd determination of consumer's equilibrium with the help of Indifference curve.)
What is consumer equilibrium?
consumer equilibrium states that consumer maximise his utility with the given income and with the given price or when a consumer getting maximum satisfaction with available resources then he will be in a state of equilibrium.
To what extent is the ordinal utility approach an improvement of cardinal approach?
to what extent is ordinal utility approach and improvement cardinal in explaining consumer behaviour in economics
What are the assumptions of cardinal utility approach?
Primarily cardinal utility approach has 5 assumptions. 1 rationality: the consumer is rational about his spending. 2 cardinal utility: the utility/satisfaction can be measured in cardinal NOs like 10, 8, 15, 20etc 3 constancy of money: The money of consumer must remain constant. 4 diminishing marginal utility: Marginal/additional utility of consumer decreases along with successive use of any commodity. 5 total utility: Total utility depends on quantity of commodity. 3
How does cardinal utility approach explain consumer behaviour?
When we can not measure in terms of money but we can measure of lavel of satisfaction then it is called cardinal approach
What is Consumer equilibrium under ordinal utility approach?
Consumer equilibrium is the point where consumer attains highest level of satisfaction. There are two conditions of equilibrium under ordinal approach 1- Necessary Condition: 'Budget line is tangent to the highest possible indifference curve.' 2- Sufficient Condition: 'At equilibrium, Indifference curve must be convex to the origin' Thus, at equilibrium , Px/Py (absolute slope of Budget line) = dy/dx (absolute slope of Indifference Curve) (In simple words, it'd determination of consumer's equilibrium with the help of Indifference curve.)
What is consumer equilibrium?
consumer equilibrium states that consumer maximise his utility with the given income and with the given price or when a consumer getting maximum satisfaction with available resources then he will be in a state of equilibrium.
Consumer equlibrium with the help of law of dimnishing marginal utility?
types of equilibrium in consumer theory
To what extent is the ordinal utility approach an improvement of cardinal approach?
to what extent is ordinal utility approach and improvement cardinal in explaining consumer behaviour in economics
How diminishing law guides consumer to get equilibrium?
A consumer buys/consumes a product only if marginal utility derived from it is more than marginal utility of money. As he continues consuming the marginal utility derived from every additional unit goes on diminishing but marginal utility of money remains constant. Both utilities match at a place i.e; where marginal utility of product becomes equal to marginal utility of money the consumer stops consumption thus equilibrium is struck.
What are the assumptions of cardinal utility approach?
Primarily cardinal utility approach has 5 assumptions. 1 rationality: the consumer is rational about his spending. 2 cardinal utility: the utility/satisfaction can be measured in cardinal NOs like 10, 8, 15, 20etc 3 constancy of money: The money of consumer must remain constant. 4 diminishing marginal utility: Marginal/additional utility of consumer decreases along with successive use of any commodity. 5 total utility: Total utility depends on quantity of commodity. 3
How does cardinal utility approach explain consumer behaviour?
When we can not measure in terms of money but we can measure of lavel of satisfaction then it is called cardinal approach
Differences between cardinal and ordinal utility approach?
A difference is that with ordinal utility approaches, you cannot numerically measure the level of consumer satisfaction. With cardinal utility approaches, you can to an extent.
What is meant of consumer equilibrium?
consumers ability to have equal choices Added: Where a consumer makes choices about how much of a number of goods they will consume to maximise their total satisfaction (Utility).
What is difference between ordinal approach and cardinal approach?
In consumer behavior, the satisfaction that consumers get by consuming commodities is utility. A cardinalist thinks that utility can be measured, quantified, and expressed in quantitative terms. An ordinalist thinks that you cannot measure utility in quantitative terms.
Differentiate between cardinal and ordinal theories of consumer behavior?
. Cardinal Approach refers that you can calculate or Measure the utility (degree of satisfaction) Numerically, while According to ordinal approach you can not measure the utility numerically. 2. Cardinal Approach follow the Law of Diminishing Marginal Utility while Ordinal Approach follow the Indifference Curve. 3.Cardinal Approach Emphasis on units while ordinal approach is based on rank.
What extent is ordinal utility approach an advantage to cardinal utility approach?
cardinal utility
