click below
click below
Normal Size Small Size show me how
ECONOMICS
consumer equlibrium (utility analysis )
Question | Answer | |
---|---|---|
what are the relations between TU and MU (explain with grpah) | 1)as long as MU is positive 2) when MU is 0 TU is MAXIMUM and constant 3)when MU is negative TU starts diminishing | |
explain law of DMU and its assumptions | law of dmu states that as more and more standard units of a commodity are consumed, marginal utility derived from every additional unit must decline (fundamental psycological law ) | assumptions 1)only standard units of a commodity are consumed 2)consumption of the commodity is continuous |
exceptions of LAW OF DMU | consumption of alcohol collection of book acqusisition if money | |
assumptions of consumer equilibrium | 1)rational consumer (aim is consumer is equilibrium) 2)cardinal utility ((utility can be measured in numbers ) 3)independent utility( utility only from consuming that one good ) 4) marginal utility of money is constant | |
consumer equilibrium (one commodity case ) what are the factors it depends on | price of the commodity marginal and total utility of the commodity marginal utility of the money | |
difference in conditions of equilibrium for one commodity and more than one | ONE COMMODITY 1)MUx/Px=MUm 2)marginal utility of money stays constant 3)law of SMU holds good | 2 or more commodity 4)rupee worth of good should be constant across all commodity 1)MUx/Px=MUy/Py 2)marginal utility of money stays constant 3)LAW OF DMU holds goods |
why is cardinal method of measuring utility bad | its irrelavent to meausre satisfaction in numbers like 123 rather its better in terms of high low moderate |