Analysis Of Consumer Demand BY:- Bikash Singh-114 Dipesh Gupta -112 Bijendra Pandit-113 Ashwini Chaudhary-111 Balmiki Yadav-109 Majalum Rean-108
• DEMAND • Conceptually, ‘demand’ implies a desire for a commodity backed by the ability and willingness to pay for it. Essential Elements Of Demand- • Quantity demanded of a commodity • Price at which a commodity is demanded • Time period over which a commodity is demanded • Market area in which a commodity is demanded
Assuming that utility is measurable and additive, total utility is the sum of the utility derived by a consumer from the various units of a good or service he consumes at a point or over a period of time. Example: (X)=U(X)=16X–X 2 where X is the amount a good that is consumed in a given period of time. 5 units of the product per period of time yields 55 utils of satisfaction Total Utility
This law states that as the quantity of a commodity goes on increasing, the utility derived from each successive unit goes on diminishing, consumption of all other commodities remaining the same. Example- Let us assume that a consumer consumes only one commodity, X, and the utility is measurable in quantitative terms. Below is the schedule of the total utility and marginal utility for the commodity X. Law of Diminishing Marginal Utility Units of Commodity X Total Utility (TUx) Marginal Utility (MUx) 1 30 30 2 50 20 3 60 10 4 65 5 5 65 0 6 45 -20
0 1 2 3 4 5 6 7 0 10 20 30 40 50 60 70 Y-Values 0 1 2 3 4 5 6 7 -30 -20 -10 0 10 20 30 40 Y-Values
The unit of the consumer good must be a standard one. The consumer’s taste or preference must remain the same during the period of consumption. There must be continuity in consumption. The mental condition of the consumer must remain normal during this period. Assumptions
Cardinal Utility Ordinal Utility Consumer Behavior Analysis Approach
Meaning- Cardinal utility quantitatively measures the preference of an individual towards a certain commodity. Numbers assigned to different goods or services can be compared. A utility of 100 units towards a cup of coffee is twice as desirable as a cup of tea with a utility level of 50 units. CARDINAL UTILITY APPROACH
1. Rationality 2. Limited Money Income 3. Maximization of Satisfaction 4. Utility is Cardinally Measurable 5. Diminishing Marginal Utility 6. Constant Marginal Utility 7. Utility is Additive ASSUMPTIONS
One Commodity Model Multiple Commodity Model CONSUMER’S EQUILIBRIUM MODELS
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- Fall '17
- Utility, MUy