Unit-5 Consumer Equilibrium - Cardinal and Ordinal Approaches

In this unit, we continue the discussion on demand and focus our attention on consumer’s behaviour in order to explain the law of demand.

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When marginal utility is increasing what happens to total utility?

The following table shows combinations of two goods X and Y along an indifference curve.

Calculate the marginal rate of substitution at each point on the indifference curve?
When price of X is Rs.3.0 and the price of Y is Re.1.0, utility is maximised on this curve. What is the utility maximising combination? Explain.

Can complementary goods be inferior goods?

The following table shows total utility (TU) and marginal utility (MU) schedules of Roomali roti and Chicken curry for an individual consumer.

Suppose that consumer’s income is Rs.12 and prices of Roomali roti and Chicken curry are Rs.2 per 100 gm. each. What is the utility maximising combination of Roomali roti and Chicken curry?

When total utility is increasing what happens to marginal utility?

he following table shows the relationship between total utility derived from consuming various quantities of milk. Calculate the marginal utility.

Suppose the marginal utility schedule is given as MUx = 40- 0.5 Qx. If marginal utility of money is equal to one and is constant, find out the demand schedule?

(Hint: set Px = MUx )

When MU is zero, what happens to TU?

When total utility is stationary, neither increasing nor decreasing, what happens to marginal utility?

Given the following MU schedule, when the price of good X is Rs.10 and marginal utility of money equals one, what will be the consumer’s demand?