Lecture iv

CONSUMER BEHAVIOUR ,[object Object],[object Object],[object Object],[object Object],[object Object]

UTILITY ANALYSIS ,[object Object],[object Object],[object Object]

UTILITY ANALYSIS 4 15 A4 3 18 A3 1 22 A2 2 20 A1 Ordinal Cardinal Good

RELATION BETWEEN TOTAL & MARGINAL UTILITY ,[object Object],[object Object],[object Object],[object Object],[object Object]

THE LAW OF DIMINISHING MARGINAL UTILITY ,[object Object]

[object Object],[object Object],[object Object],[object Object]

ASSUMPTIONS OF THE LAW OF DMU ,[object Object],[object Object],[object Object],[object Object],[object Object]

THE LAW OF EQUI-MARGINAL UTILITY ,[object Object],[object Object]

CONSUMER’S EQUILIBRIUM ,[object Object],[object Object],[object Object]

DIMINISHING MU & THE LAW OF DEMAND ,[object Object],[object Object],[object Object],[object Object]

D MU Q Q1 Q2 Q Q1 Q2 A B C P2 P1 P P P1 P2 QD MU&P 0 0 P Utility MU & DD CURVE

LIMITATIONS OF CARDINAL ANALYSIS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

INDIFFERENCE CURVE (IC) ANALYSIS ,[object Object],[object Object],[object Object],[object Object],[object Object]

ASSUMPTIONS OF IC ANALYSIS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

IC SCHEDULE ,[object Object],4 5 E 5 4 D 7 3 C 10 2 B 14 1 A Com. Y Com. X Combinations

Techniques of (IC) ANALYSIS ,[object Object],[object Object],[object Object],[object Object],[object Object]

INDIFFERENCE CURVE 0 Com. X Com. Y IC

MARGINAL RATE Of SUBSTITUTION ,[object Object],1/1 1:1 4 5 E 2/1 2:1 5 4 D 3/1 3:1 7 3 C 4/1 4:1 10 2 B -- -- 14 1 A ∂ y/∂x MRSxy Com. Y Com. X Combn

MARGINAL RATE OF SUBSTITUTION ,[object Object],[object Object],[object Object]

IC FOR NORMAL GOODS ,[object Object],0 X Y 1

IC FOR SUBSTITUTES ,[object Object],Y X 0 a b

IC FOR COMPLEMETS IC1 IC2 IC3 IC4 0 X Y Consumption in fixed proportion

PROPERTIES OF IC ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

BUDGET OR PRICE LINE ,[object Object],0 Com. X Com. y A B X Y M= Pxqx + Pyqy

CONSUMER’S EQUILIBRIUM ,[object Object],[object Object],[object Object],[object Object],[object Object]

ASSUMPTIONS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

EQUILIBRIUM CONDITIONS ,[object Object],[object Object],[object Object]

CONSUMER’S EQUILIBRIUM ,[object Object],1 2 3 4 E A B 0 C D Y COM.X

INCOME EFFECT--IE ,[object Object],[object Object],[object Object],[object Object],[object Object]

INCOME EFFECT--IE ,[object Object],ICC 1 2 3 A B B1 B2 0 COM.X E E1 E2

INCOME EFFECT--IE ,[object Object],[object Object],[object Object],[object Object]

SUBSTITUTION EFFECT--SE ,[object Object],[object Object],[object Object]

SUBSTITUTION EFFECT-- SE E E1 1 A COM.X COM.Y 0 B B2 B1 A1

PRICE EFFECT--PE ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

PRICE EFFECT--PE PCC 1 2 3 A B B1 B2 0 COM.Y COM.X

DERIVATION OF DEMAND CURVE FROM PRICE CONSUMPTION CURVE

SUPERIORITY OF IC ANALYSIS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Consumer’s surplus ,[object Object],[object Object]

Lecture iv

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Lecture iv