Utility Approach- Two Commodities Approach

1) Utility Approach - Two commodities


 



































2) Example 1

































3) Example 2


4) If Consumer is not in Equilibrium






















Solution:














5) Question
















Comments

Post a Comment

Popular posts from this blog

Some important Questions on Single Commodity Approach

Image
  1) Question 1 2) Question 2 3) Question 3 4) Question 4 Or we could have done by the method, where we checked  MU ₓ / Pₓ = MUₘ , i.e., the rupee worth of satisfaction the consumer actually gets (MU ₓ / Pₓ)  = to the rupee worth of satisfaction he expects (MU ₘ) . The answer is 12/4 (3)  = 3, which is same as the above method. 
Read more

cardinal and ordinal utility

Image
  1) Cardinal measurement of utility means that utility (satisfaction) can be measured in terms of cardinal numbers or units like 1,2 and 3. And the unit of measurement is called utils. Ordinal measurement of utility means that utility (satisfaction) can only be ranked (high or low); it cannot be expressed in terms of units like 1,2 and 3.
Read more

Law of Diminishing Marginal utility/ Fundamental Law of Satisfaction / Fundamental psychological law

Image
  1)  Law of Diminishing marginal utility states that as more and more of standard units of a commodity are continuously consumed, marginal utility derived from every additional unit must decline. Two basic assumptions are: 1) Only standard units of the commodity are consumed. Like, a cup of tea (not a spoon of tea). 2) Consumption of the commodity is continuous. Not that one unit is consumed now, and the other in the evening or tomorrow. 2) Some more assumptions:
Read more