Microeconomics: Theory of Consumer Behavior

Categories: Freshers Study Economics Intermediate class NCERT

Microeconomics: Theory of Consumer Behavior 

 

The consumer has to decide how to spend her income on different goods. Economists call this the problem of choice. Most naturally, any consumer will want to get a combination of goods that gives her maximum satisfaction. What will be this ‘best’ combination? This depends on the likes of the consumer and what the consumer can afford to buy. The ‘likes’ of the consumer are also called ‘preferences’. And what the consumer can afford to buy, depends on prices of the goods and the income of the consumer. This chapter presents two different approaches that explain consumer behaviour (i) Cardinal Utility Analysis and (ii) Ordinal Utility Analysis.

 

Preliminary Notations and Assumptions

A consumer, in general, consumes many goods; but for simplicity, we shall consider the consumer’s choice problem in a situation where there are only two goods: bananas and mangoes. Any combination of the amount of the two goods will be called a consumption bundle or, in short, a bundle. In general, we shall use the variable x1  to denote the quantity of bananas and x2 to denote the quantity of mangoes. x1  and x2  can be positive or zero. (x1,x2) would mean the bundle consisting of x1  quantity of bananas and x2  quantity of mangoes. For particular values of x1 and x2 , (x1,x2), would give us a particular bundle. For example, the bundle (5,10) consists of 5 bananas and 10 mangoes; the bundle (10, 5) consists of 10 bananas and 5 mangoes.

 

Utility

A consumer usually decides his demand for a commodity on the basis of utility (or satisfaction) that he derives from it. What is utility? Utility of a commodity is its want-satisfying capacity. The more the need of a commodity or the stronger the desire to have it, the greater is the utility derived from the commodity. Utility is subjective. Different individuals can get different levels of utility from the same commodity. For example, some one who likes chocolates will get much higher utility from a chocolate than some one who is not so fond of chocolates, Also, utility that one individual gets from the commodity can change with change in place and time. For example, utility from the use of a room heater will depend upon whether the individual is in Ladakh or Chennai (place) or whether it is summer or winter (time).

 

Cardinal Utility Analysis

Cardinal utility analysis assumes that level of utility can be expressed in numbers. For example, we can measure the utility derived from a shirt and say, this shirt gives me 50 units of utility. Before discussing further, it will be useful to have a look at two important measures of utility.

Top articles
Servlet interview questions and answers for experienced Published at:- Spring Interview Questions and Answer for Experienced Published at:- Spring Boot Features for Java Developers (2022) Published at:- AWS Interview Questions Answers for Freshers and Experienced Published at:- Splunk Interview Questions and Answers for freshers and Experienced Published at:- Financial Current Affairs of 2022 Published at:- IOS Interview Questions for freshers and experienced Published at:- Red Hat Interview Question Answers for Freshers and experienced Published at:- Python Interview Question and Answer Published at:- Current Affairs 2022: Iran successfully test-fires Noor 2 satellite Published at:- North Korea begins testing on spy satellites Published at:- World's first airline to use solar aviation fuel: Swiss airline Published at:- Ukraine want EU Membership, here’s how that would work Published at:- Blue Economy Roadmap Signed by India and France: India, France sign roadmap on blue economy, pledge to increase bilateral exchan Published at:- World Health Organization (WHO) Launched App Quit Tobacco Published at:- Chief Justice's Impeachment Motion of Nepal Published at:- New HIV variant found in the Netherlands Published at:- Australia new plans to protect the Great Barrier Reef Published at:- Current Affairs Quiz for Bank Exam 2022 Published at:- Basic General Knowledge Question and Answer (Quiz) Published at:- Basic Indian History General Knowledge Question and Answer (Quiz) Published at:- Basic General Knowledge Question and Answer with Quiz Published at:- Champion: Pankaj Advani wins Asian Billiards title for eighth time Published at:- Katalin Novak elected Hungary's first-ever woman president Published at:- General Knowledge Optional Question and Answer of General Science - Elements and Metals Published at:- General Knowledge Optional Question and Answer of Indian Politics Published at:- Shanti Sethi appointed as Kamala Harris’s defence advisor Published at:- Today GK Updates for Bank Exam Published at:- Today GK Updates for Bank Exam Published at:- Scientists announce Human Genome Project-Write to synthesize the entire genome Published at:- NASA detects a single methane leak from Hyperion space using a spectrometer Published at:- Scientists: Underwater Robots to be used to Study Indian monsoon Published at:- Kepler-1647b, orbiting two stars discovered Jupiter-like planet. Published at:- Researchers in Assam developed two rice variants, Ranjit Sub-1 & Bahadur Sub-1, for submerged areas Published at:- Scientists identified a process to remove DNA molecules from X-Files Published at:- SpaceX successfully launches Japanese JCSAT-14 Satellite Published at:- ISRO launched seventh navigational satellite IRNSS 1G Published at:- AWS Interview Question and Answer for freshers and Experienced Published at:- Angular 13 interview Question and Answer Published at:- NCERT Class 12 Economics: CENTRAL PROBLEMS OF AN ECONOMY Published at:- Centrally Planned Economy And Organization Of Economic Activities Published at:- Know About Positive and Authentic Economics Published at:- Microeconomics: Theory of Consumer Behavior Published at:- Optimal Choice of The Consumer Published at:- The Short Run and The Long Run Published at:- The Normal Profit and Break-even Point Published at:- Equilibrium, Excess Demand, Excess Supply Published at:- Simple Monopoly In The Commodity Market Published at:- General Knowledge Quiz Questions with Answers for Competitive Exams and interview Published at:- General Knowledge Quiz Questions with Answers for Competitive Exams and interview (Set 1) Published at:- Emergence Of Macroeconomics Published at:- Some Basic Concepts Of Macroeconomics Published at:- Circular Flow Of Income And Methods Of Calculating National Income Published at:- The Product or Value-Added Method Published at:- General knowledge MCQ Quiz for Competitive Exam Published at:- Daily Current Affairs of Nation Top news Published at:- Daily Current Affairs of Nation Top news 2022 Published at:- MCQ Question and Answer of general knowledge Published at:- Current Affairs of 2022 Latest Nation News Published at:- General Knowledge Current Affairs 2022 Published at:- Current Affairs 2022 About International Olympic Day and 14th BRICS Summit Published at:- International Current Affairs 2022 Published at:- Daily Current Affairs 2022 Published at:- current Affairs on national sports ,culture and plan Published at:- PHP MCQ Quiz Question with Answer Published at:- Java General Interview Questions and Answer Published at:- Java Collections Interview Question and Answer for freshers and experienced Published at:- Garbage Collector in Java Frequently Asked Questions and Answers Published at:- Difference between Exception and Error in java Exception Handling Published at:- Java Applets Interview Questions with Answer Published at:- Java Swing Interview Questions with Answer for freshers and experienced Published at:- Java Database Connectivity (JDBC) Interview Question and answer Published at:- Remote Method Invocation (RMI) Interview Question and Answer Published at:- Jakarta Server Page (JSP) programming language Interview Question and Answer Published at:- NCERT Class 11th Sociology and Society Introduction Published at:- Write a program in Java to display the first 10 terms of the following series: 10, 20, 30, 40, …….. Published at:- Write the program in Java to display the first ten terms of the following series: 1, 4, 9, 16, Published at:- Write a program in Java to find the sum of the given series: Published at:- Write a program in Java to find the sum of the given series: Published at:- Accountancy Question and Answer for Class 12th NCERT Published at:- Company Accounts and Analysis of Financial Statements Questions with Answers Published at:- Company Accounts and Analysis of Financial Statements Question with Answers Published at:- Company Accounts and Analysis of Financial Statements Question with Answers part 2 Published at:- Company Accounts and Analysis of Financial Statements Question with Answers Part 3 Published at:- Class 11 Economics Indian Economic Development Question and Answer Part 2 Published at:-
R4Rin Team
The content on R4Rin.com website is created by expert teams.