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CURVE
MEANING :-
An
As
all combination on IC
have equal satisfaction , a
consumer becomes
indifferent about their
choices .
INDIFFERENCE SCHEDULE
MEANING :_
It
Grapes(x)
Oranges (y)
MRS =Y/X
20
--
14
6Y:1X
5Y:1X
4Y:1X
2Y:1X
This
PROPERTIES : Always
downward
sloping.
IC
is always
convex to the
origin.
IC never intersect
each other as each
IC represent different
levels of satisfaction.
Higher IC
provides higher
level of satisfaction
MONOTONIC PREFERENCES
This
JOHN HICKS
HICKSIAN APPROACH
FOR NORMAL,
INFERIOR AND GIFFEN
GOODS
Hicksian demand functionis the
demand of a consumer over a bundle of
goods that minimizes their expenditure
while delivering a fixed level of utility.
PREREQUISITES
What is the 'Substitution Effect'
The substitution effect is the economic understanding that
as prices rise or income decreases consumers will
replace more expensive items with less costly alternatives.
What
Assumptions
1.
Utility
is an increasing function of
consumption This basically means that
the more the quantity of a good is consumed
more will be the total utility derived. Such
preferences are called monotonic
preferences
NORMAL GOODS:
Ineconomics,normal goodsare anygoodsfor
whichdemandincreases when income increases, and
falls when income decreases but price remains
constant, i.e. with a positiveincome elasticity of
demand.