Micro

Consumer’s Equilibrium The consumer is in equilibrium when he maximizes his utility, given his income and the market prices. - Anna Koutsoyiannis Every consumer aims at getting maximum satisfaction out of his given expenditure. A consumer is said to have attained equilibrium when he spends given income or budget in such a way as to yield optimum satisfaction, given the … [Read more...] about Consumer’s Equilibrium: Interplay of Budget Line and Indifference Curve

Marginal Rate of Substitution Marginal rate of substitution (MRS) may be defined as the rate at which the consumer is willing to substitute one commodity for another without changing the level of satisfaction. In other words, MRS can also be defined as the amount of a commodity that a consumer is willing to trade off for another commodity, as long as the second commodity … [Read more...] about Principle of Marginal Rate of Substitution

In microeconomics, indifference curve is an important tool of analysis in the study of consumer behavior. The concept of indifference curve analysis was first propounded by British economist Francis Ysidro Edgeworth and was put into use by Italian economist Vilfredo Pareto during the early 20th century. However, it was brought into extensive use by economists J.R. Hicks and … [Read more...] about Indifference Curve Analysis: Concept, Assumption and Properties

Income elasticity of demand is the degree of responsiveness of quantity demanded of a commodity due to change in consumer’s income, other things remaining constant. In other words, it measures by how much the quantity demanded changes with respect ot the change in income. The income elasticity of demand is defined as the percentage change in quantity demanded due to certain … [Read more...] about Income Elasticity of Demand: Definition and Types with Examples

The law of supply states that, other things remaining the same, the quantity supplied of a commodity is directly or positively related to its price. In other words, when there is a rise in the price of a commodity the quantity supplied of it in the market increases and when there is a fall in the price of a commodity, its quantity supplied decreases, other things remaining the … [Read more...] about Law of Supply : Assumptions, Exceptions and Limitations