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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.
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.)
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
Must a consumer purchase some quantity of each commodity to be in equilibrium?
No, a consumer does not need to purchase some quantity of each commodity to be in equilibrium. Consumer equilibrium occurs when a consumer maximizes their utility given their budget constraint, which can happen by consuming only one good or a combination of goods. The key is that the marginal utility per dollar spent on each good is equal, leading to an optimal allocation of resources. Thus, it is possible for a consumer to achieve equilibrium with a preference for only certain goods.
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
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.
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.)
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.
Must a consumer purchase some quantity of each commodity to be in equilibrium?
No, a consumer does not need to purchase some quantity of each commodity to be in equilibrium. Consumer equilibrium occurs when a consumer maximizes their utility given their budget constraint, which can happen by consuming only one good or a combination of goods. The key is that the marginal utility per dollar spent on each good is equal, leading to an optimal allocation of resources. Thus, it is possible for a consumer to achieve equilibrium with a preference for only certain goods.
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
When is consumer in equilibrium and maximizing total utility?
A consumer is in equilibrium and maximizing total utility when they allocate their budget in such a way that the marginal utility per dollar spent on each good is equal across all goods consumed. This condition is known as the equi-marginal principle, where the last unit of currency spent on each good provides the same additional satisfaction. At this point, the consumer has no incentive to reallocate their spending, as any change would lead to a decrease in total utility.
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 equilibrium under ordinalist approch?
Under the ordinalist approach, equilibrium refers to a state where consumers reach their highest possible level of utility given their budget constraints and preferences. This occurs when the marginal rate of substitution between goods equals the ratio of their prices, indicating that consumers have optimized their consumption choices. In this framework, utility is not measured in absolute terms but rather in relative rankings, focusing on the ordering of preferences rather than quantifying satisfaction. Consequently, equilibrium is achieved when no consumer can improve their utility by reallocating their consumption.
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.
