Utility function in consumer theory

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The utility function associated with each consumption bundle x is a number u(x) such that the basket is preferred to the cart z if and only if u(y)>u(z). It is very important to note that the number u(x) has psychological … Read More

Indifference curve and marginal rate of substitution in consumer theory

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An indifference curve connects combinations of two goods and services whose consumption provides the same level of satisfaction. The indifference curves have three properties: the slope of the indifference curves is negative, the indifference curves do not intersect, and the … Read More

Ordinal utility and preferences in the consumer theory

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Ordinal utility If the consumption of a quantity qA of a good A gives satisfaction 100 and a quantity qB of a good gives a satisfaction of 10, qA is equivalent to 10 times qB. The above example illustrates the … Read More