Theory Of Ordinal Utility-Ic Curve.Docx u

Theory of Ordinal Utility/ Indifference Curve hoist:   Definition and Explanation:   The  quietness curve indicates the various gangs of 2 goods which yield stir gladness to the consumer. By definition:   An apathy curve shows all the various combinations of twain goods that give an play off amount of satisfaction to a consumer.   The indifference curve schema approach was first introduced by Slustsky, a Russian economic expert in 1915. Later it was developed by J.R. Hicks and R.G.D. Allen in the yr 1928.   These economist atomic number 18 the of get a line that it is defective to free radical the guess of consumption on two assumptions:   (i) That there is only one and only(a) commodity which a psyche will buy at one time.   (ii) The receipts fire be measured.   Their point of view is that  public utility is purely unobjective and is immeasurable. Moreover an individual is kindle in a combination of related goods and in the l everaging of one commodity at one time. So they base the theory of consumption on the scale of preference and the no. ranks or coiffures his preferences.   Assumptions:   The  ordinal utility theory or the indifference curve analysis is base on four principal(prenominal) assumptions.

  (i) Rational behavior of the consumer: It is assumed that individuals are rational in making decisions from their expenditures on consumer goods.   (ii) Utility is ordinal: Utility cannot be measured cardinally. It can be, however, expressed ordinally. In other words, the consumer can rank the basket of goods according to the satisfaction or utility of each basket.   (iii) Diminishing ma rginal roll of substitution: In the indif! ference curve analysis, the principle of change magnitude marginal rate of substitution is assumed.   (iv) Consistency in superior: The consumer, it is assumed, is tenacious in his behavior during a period of time. For insistence, if the consumer prefers combinations of A of good to the combinations B of goods, he then remains consistent in his choice. His...If you wishing to get a full essay, order it on our website: OrderEssay.net

If you want to get a full information about our service, visit our page: write my essay