Compendium admissions 2023-25
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- Utility Theory
- Cardinal Utility
- Marginal Utility
| Elasticity A product’s or good’s elasticity is determined by how much demand changes when the price rises or falls. An inelastic product is one that people continue to buy even after the price changes. The elasticity of an item or service varies depending on the number of close replacements available, its relative cost, and the period since the price change happened. Elasticity is an essential economic indicator, particularly for sellers of products or services, since it reveals how much of an item or service purchasers consume when the price of the good or service varies. When a product is elastic, a change in price causes a rapid change in the amount required. When a good is inelastic, 31 the demand changes little, even when the price of the commodity changes. An elastic good experiences arise in demand when the price lowers and a reduction in demand when the price increases. Utility Theory In economics, utility is derived from the notion of usefulness. An economic good is beneficial to the degree that it can satisfy a consumer's demand or need. Ordinal Utility: The ordinal theory of utility proposes that people may arrange or rank the usefulness of distinct discrete units of economic commodities. Cardinal Utility: Utility is represented as a measurable or cardinal feature of the economic products consumed by a person. Economists use a unit called as a "util" to represent the amount of psychological pleasure generated by a certain item or service fora subset of people in various conditions to aid in this quantitative assessment of satisfaction. Marginal Utility: The increased utility acquired from consuming one additional unit of an item or service or the additional use that a person has for an additional unit. Eg: First, Apple can give one 5 utils, Second can give 3 utils etc. Cost Download 4.08 Mb. Share with your friends:
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