Date : 25.5. 20202
A very good morning boys
Today we start with our 2nd chapter in Micro Economics (Consumer's Equilibrium)
Let us begin:
A consumer is one who buys goods and services for satisfaction of wants.
The main objective is to get maximum satisfaction from spending his income on various goods and services.
The two approaches to study consumer's behaviour and consumer's equilibrium are:
1.Cardinal Utility Approach (or Marshall's Utility Analysis or Marginal Utility Analysis)
2. Ordinal utility Approach ( Indifference Curve Analysis)
Under the Cardinal Utility Approach, the concept of "UTILITY" is used to attain the Consumer's Equlibrium.
Concept of Utility:
Utility refers to the want satisfying power of a commodity.
It is the ability of a good to satisfy a want
Acoording to Classical economists, utility can be measured , in the same way, as weight or heightis measured.They assumed that utility can be measured in cardinal (numerical) terms .
So , the economist derived an imaginary measure,known as 'UTIL'
'UTILs' are imaginary and psychological units which are used to measure satisfactionobtained from consumption of a certain quantity of a commodity.
Another way to measure utility is in terms of money or price,which the consumer is willing to pay.
Suppose 1 Util = Rs1
You have an Ice Cream and decide that it has given you a satisfaction of 20 Utils.Since 1Util = Rs1 then the Ice will yeild utility worth Rs 20
To properly understand the meaning of utility , it is necessary to discuss two of its very important concepts (i) Total Utility (ii) Marginal Utility
1,Total Utility(TU) : It is the total satisfaction obtained from the consumption of all possible units of a commodity.
TUn= U1+U2+U3+........+ Un
2. Marginal Utility (MU) : It is the additional utility derived from the consumption of one more unit of the given commodity.
MUn= TUn- TUn-1 or MU= Change in TU/ Change in number of units
TU= ∑MU
The Law of Diminishing Marginal Utility (DMU) states that as we consume more and more units of a commodity, the utility derived from each successive unit goes on decreasing.
Please go through the video link given below to understand the topic better
https://www.youtube.com/watch?v=lyq2X6Ai1dE&t=640s
A very good morning boys
Today we start with our 2nd chapter in Micro Economics (Consumer's Equilibrium)
Let us begin:
A consumer is one who buys goods and services for satisfaction of wants.
The main objective is to get maximum satisfaction from spending his income on various goods and services.
The two approaches to study consumer's behaviour and consumer's equilibrium are:
1.Cardinal Utility Approach (or Marshall's Utility Analysis or Marginal Utility Analysis)
2. Ordinal utility Approach ( Indifference Curve Analysis)
Under the Cardinal Utility Approach, the concept of "UTILITY" is used to attain the Consumer's Equlibrium.
Concept of Utility:
Utility refers to the want satisfying power of a commodity.
It is the ability of a good to satisfy a want
Acoording to Classical economists, utility can be measured , in the same way, as weight or heightis measured.They assumed that utility can be measured in cardinal (numerical) terms .
So , the economist derived an imaginary measure,known as 'UTIL'
'UTILs' are imaginary and psychological units which are used to measure satisfactionobtained from consumption of a certain quantity of a commodity.
Another way to measure utility is in terms of money or price,which the consumer is willing to pay.
Suppose 1 Util = Rs1
You have an Ice Cream and decide that it has given you a satisfaction of 20 Utils.Since 1Util = Rs1 then the Ice will yeild utility worth Rs 20
To properly understand the meaning of utility , it is necessary to discuss two of its very important concepts (i) Total Utility (ii) Marginal Utility
1,Total Utility(TU) : It is the total satisfaction obtained from the consumption of all possible units of a commodity.
TUn= U1+U2+U3+........+ Un
2. Marginal Utility (MU) : It is the additional utility derived from the consumption of one more unit of the given commodity.
MUn= TUn- TUn-1 or MU= Change in TU/ Change in number of units
TU= ∑MU
The Law of Diminishing Marginal Utility (DMU) states that as we consume more and more units of a commodity, the utility derived from each successive unit goes on decreasing.
Please go through the video link given below to understand the topic better
https://www.youtube.com/watch?v=lyq2X6Ai1dE&t=640s
good afternoon sir,KEVIN SUNIL PAPPAN 11B
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