The following article will guide you about how to construct a customer’s income and price consumption curve. If the income of the consumer increases, his budget line will have the same slope (relative price ratios remaining unchanged) but that line will then shift to the right (he can get more goods for his increased money income). Thus, income changes will [...]
In this article we will discuss about the ordinal utility function of the consumer. Consider a simple case where the consumer purchases only two goods, Q1 and Q2. His ordinal utility function is: U = f(q1, q2) (6.1) where U is the ordinal utility number, and q1 and q2 are the quantities consumed of the two goods. Assume that U [...]
In this article we will discuss about the lexicographic orderings by consumers, explained with the help of suitable diagrams. The indifference curves (ICs) would be negatively sloped, i.e., they would be sloping downward towards right like the curves given in Fig. 6.2. Axiom of continuity of preferences ensures that the ICs really exist. However, a consumer may order his commodity [...]