CB-Utility approach

CB-Utility approach - Microeconomics for Managers Term- I...

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Unformatted text preview: Microeconomics for Managers Term- I Based on his preferences, Mihir is willing to trade 4 movie tickets for 1 ticket to an IPL match. If movie tickets cost Rs. 200 each and a ticket to the IPL match costs Rs.1000, should Mihir make the trade? Give reasons. CB In Economics teaches-how a representative consumer makes rational choices in the market given limited resources. Rationality means consistency and self- interest maximization. Main elements Consumers preference budget line consumers choice (demand theory). Utility theory and indifference curve approach ( Highlight for today ) Characteristics approach ( Next session) What is utility? Mental satisfaction a consumer gets from consuming a good -subjective in nature, may change depending on time and place. Earlier it was thought utility is measurable (utils) Law of diminishing marginal utility Under ordinal utility, we only give a rank ordering Magnitude does not have any meaning Quantity Total U Marginal U 1 15 15 2 28 13 3 39 11 4 45 6...
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This note was uploaded on 03/01/2012 for the course STRATEGY Om121 taught by Professor Abhinavdhar during the Spring '12 term at Harvard.

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CB-Utility approach - Microeconomics for Managers Term- I...

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