Author: admin
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Consumer Equilibrium
What is Consumer Equilibrium? Consumer Equilibrium refers to a situation where the consumer has achieved the maximum possible satisfaction from the quantity of the commodities purchased given his/her income and prices of the commodities in the market. Table of Content [Show] The ordinal utility approach (which follows the two-commodity model explanation) provides two conditions with respect to…
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What is Budget Line? Definition, Concept, Shift, Slope
What is Budget Line? Budget line represents various combinations of two commodities, which can be purchased by a consumer at the given income level and market price. The budget line is an important element of consumer behaviour analysis. In this section, let us study about the concept and importance of the budget line in detail. Table…
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What is Marginal Rate of Substitution?
What is Marginal Rate of Substitution? Marginal rate of substitution (MRS) refers to the rate at which one commodity can be substituted for another commodity maintaining the same level of satisfaction. Table of Content [Show] The MRS for two substitute goods X and Y may be defined as the quantity of commodity X required to replace…
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What is Indifference Curve
What is Indifference Curve? Indifference curve can be defined as the locus of points each representing a different combination of two good, which yield the same level of utility and satisfaction to a consumer. Table of Content [Show] Therefore, the consumer is indifferent to any combination of two commodities if he/she has to make a choice between…
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What is Cardinal and Ordinal Utility? Assumptions
What is Cardinal Utility? Cardinal Utility explains that the satisfaction level after consuming a good or service can be scaled in terms of countable numbers. The cardinal utility theory or approach was proposed by classical economists, Gossen (Germany), William Stanley Jevons (England), Leon Walras (France), and Karl Menger (Austria). Later on a neo-classical economist, Alfred Marshall…
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What is Law of Diminishing Marginal Utility
What is Law of Diminishing Marginal Utility? The law of diminishing marginal utility states that as the quantity consumed of a commodity continues to increase, the utility obtained from each successive unit goes on diminishing, assuming that the consumption of all other commodities remains the same. Table of Content [Show] To put simply, when an individual continues to…
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What is Utility in Economics
What is Utility? In economics, utility can be defined as a measure of consumer satisfaction received on the consumption of a good or service. The level of satisfaction derived by a consumer after consuming a good or service is called utility. The concept of utility is used in neo classical Economics to explain the operation of the law of…
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What is Consumer Demand in Economics
What is Consumer Demand? Consumer demand is defined as the willingness and ability of consumers to purchase a quantity of goods and services in a given period of time, or at a given point in time. Consumers consider various factors before making purchases. For example, a particular brand, price range, size, features, etc. These factors differ…
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What is Market Equilibrium
What is Market Equilibrium? Market Equilibrium is a situation where the price at which quantities demanded and supplied are equal (Supply = Demand). When the market is in equilibrium, there is no tendency for prices to change. Table of Content [Show] Market system is driven by two forces, which are demand and supply. This is because these…
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Supply Curve Shifts
Movement and Shift In Supply Curve Movement in Supply Curve Movement along Supply Curve is when the commodity experience change in both the quantity supply and price, causing the curve to move in a specific direction. Table of Content [Show] Shift in Supply Curve The shift in supply curve is when, the price of the commodity remains constant, but…