MBAE-103: Managerial Economics – Unit 5
Objectives: outline the shortcomings of Marshallian utility analysis of consumer’s demand behaviour; explain the concept of a scale of preferences; enumerate the properties of indifference curves; derive consumer’s demand curve from price consumption curve measure consumer’s surplus with the help of indifference curves; and explain the superiority of otherwise of indifference curves analysis over Marshallian utility analysis.
Materials:
The relevant material is available here.
Questions:
- What are the assumptions of indifference curves approach?
- State the properties of indifference curves and derive them from the assumptions upon which indifference curves are drawn.
- What do you mean by marginal rate of substitution? Why does marginal rate of substitution of X for Y fall when quantity of X is increased?
- Explain the attainment of equilibrium position by a consumer with the help of an indifference curve.
- Explain the concept of consumer’s surplus and show the way it is measured with the help of indifference curves.