Economics
Econo Notes
mics Video Notes
Consumer
Equilibrium
Class 11ᵗʰ
, Introduction
The aim of this chapter is to make you understand; How does a consumer
maximize his satisfaction from consumption of goods and services.
Who is consumer ?
A consumer is one who buy goods and services for satisfaction of wants.
Types of Utility Approaches
Cardinal Utility Approach (or Marshall’s Utility Analysis or Marginal
Utility Analysis)
Measures satisfaction in numeric terms (e.g. “10 units of utility”).
Ordinal Utility Approach (or Indifference Curve Analysis or Hicksian
Analysis)
Ranks preferences without assigning numerical values (e.g. “I prefer A over
B”).
Concept of Utility
Meaning of Utility
Utility refers to want satisfying power of a commodity.
Utils are imaginary units which are used to measure satisfaction (utility).
Utility differs from -
1. Person - to - Person
2. Place - to Place
3. Time - to - time
Total Utility (TU)
Total Utility refers to the total satisfaction obtained from the consumption
of all possible units of a commodity.
TU = U + U + U +...............+ U
n 1 2 3 n
Marginal Utility (MU)
Marginal Utility is the additional utility derived from the consumption of one
more unit of the given commodity
MUn = TU n - TU n-1
One more way to measure utility
Change in Total Cost ∆TU
MU = =
Change in units of output ∆Q
Econo Notes
mics Video Notes
Consumer
Equilibrium
Class 11ᵗʰ
, Introduction
The aim of this chapter is to make you understand; How does a consumer
maximize his satisfaction from consumption of goods and services.
Who is consumer ?
A consumer is one who buy goods and services for satisfaction of wants.
Types of Utility Approaches
Cardinal Utility Approach (or Marshall’s Utility Analysis or Marginal
Utility Analysis)
Measures satisfaction in numeric terms (e.g. “10 units of utility”).
Ordinal Utility Approach (or Indifference Curve Analysis or Hicksian
Analysis)
Ranks preferences without assigning numerical values (e.g. “I prefer A over
B”).
Concept of Utility
Meaning of Utility
Utility refers to want satisfying power of a commodity.
Utils are imaginary units which are used to measure satisfaction (utility).
Utility differs from -
1. Person - to - Person
2. Place - to Place
3. Time - to - time
Total Utility (TU)
Total Utility refers to the total satisfaction obtained from the consumption
of all possible units of a commodity.
TU = U + U + U +...............+ U
n 1 2 3 n
Marginal Utility (MU)
Marginal Utility is the additional utility derived from the consumption of one
more unit of the given commodity
MUn = TU n - TU n-1
One more way to measure utility
Change in Total Cost ∆TU
MU = =
Change in units of output ∆Q
