MBAE-103: Managerial Economics – Unit 4

MBAE-103: Managerial Economics – Unit 4

Objectives: explain the concept of utility; analyse and use cardinal utility approach for measurement of utility; distinguish between cardinal and ordinal utility approaches; and list the assumptions of consumer preferences.

Materials:
The relevant material is available here.

Questions:

1. A consumer consumes only 2 goods x and y. State and explain the conditions of consumer equilibrium using utility analysis.
2. Given the price of goods, how will a consumer decide as to how much quantity of the goods to buy? Use utility analysis.
3. Why does marginal utility diminished?
4. What does happen to marginal utility at a point when total utility is maximum?
5. What are the basic assumptions about consumer preferences?