desirable goods‚ a consumer will definitely know which is preferred‚ or will definitely know that s/he would be equally happy with either‚ nor does it imply that the consumer finds both baskets undesirable. Rather‚ indifference implies that both baskets are equally desirable. This state of indifference plays a crucial role in the model of consumer choice. 2. Axiom of Non-Satiation Given two market baskets‚ A and B‚ the consumer will always prefer the basket that has more of at least one item and no
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Spotlight on the theory Indifference Curve Analysis The aim of indifference curve analysis is to analyse how a rational consumer chooses between two goods. In other words‚ how the change in the wage rate will affect the choice between leisure time and work time. Indifference analysis combines two concepts; indifference curves and budget lines (constraints) The indifference curve An indifference curve is a line that shows all the possible combinations of two goods between which a person is
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1. When a good or service satisfies wants‚ we say that it provides: A. utility maximization. B. opportunity cost. C. revenue potential. D. utility. 2. Refer to the above data. The value for Y is: A. 25. B. 30. C. 40. D. 45. 3. Refer to the above data. The value for X is: A. 15. B. 5. C. 55. D. 10. 4. Refer to the above data. The value for W is: A. 15. B. 20. C. 25. D. 30. 5. Refer to the above data. The value for Z is: A. -5. B. +5. C. -10. D. zero. 6. A product
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Following: 1. Indifference Curve - An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Definition: An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility. Description: Graphically‚ the indifference curve is drawn
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Supplement to Unit - II BEHIND THE DEMAND CURVE: THE THEORY OF CONSUMER CHOICE Here‚ the purpose is to explain the derivation of the demand function and to provide an understanding of the consumer decision-making process. Consumer Preferences Individuals make choices based on their personal tastes and preferences. Tastes and preferences are shaped by many factors. Some of the factors are family environment‚ physical condition‚ age‚ sex‚ education‚ religion‚ and location. In the analysis that
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the demand curve? To show what the consumer should do to maximize utility‚ a budget line must be added to the preferences shown in the indifference curves. The picture below adds one. Point a is not attainable because it lies to the right of the budget line. The consumer is indifferent between points b and d because they lie on the same indifference curve‚ but point d is cheaper than b because d lies below the budget line. The consumer wants to get on the highest indifference curve affordable
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ECM002 Business Economics Instructions: Please answer four out of the following six following questions: Question 1. Suppose Cola- Sol and Miniranda are the only two companies producing a particular type of cola drink in the soft drink industry. Both companies are considering launching a new drink with a light lemon twist. They can launch their products either at a low price or at a high price. The expected net payoffs are the following: If both companies choose a high price strategy‚ Cola-
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The Utility Concept in Economics I. Background. Utility is a measurement of consumer preferences made under a variety of assumptions with respect to the decision context being studied. The point of the utility measurement is to enable the study of behavior within the framework of the assumptions made in a fashion that takes advantage of mathematical tools. There are three decision frameworks: Certainty: The consumer knows without risk or uncertainty the outcome of making a choice. Choices
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Lesson - 1 Business Economics- Meaning‚ Nature‚ Scope and significance Introduction and meaning : (Author : Dr. M.S. Khanchi) Business Economics‚ also called Managerial Economics‚ is the application of economic theory and methodology to business. Business involves decision-making. Decision making means the process of selecting one out of two or more alternative courses of action. The question of choice arises because the basic resources such as capital‚ land‚ labour and management are limited and
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to illustrate how a manager’s view of behavior can affect decision making. It summarizes the economic view of behavior and contrasts it with other views. The chapter presents a graphical analysis of utility maximization and decision making under uncertainty. The concepts in this chapter are an important foundation for subsequent material in the book. CHAPTER OUTLINE ECONOMIC BEHAVIOR: AN OVERVIEW Economic Choice Marginal Analysis Managerial Application: Marginal Analysis of Customer Profitability
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