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ANALYSIS OF

CONSUMER BEHAVIOUR

ORDINAL UTILITY

APPROACHBY INDIFFERENCE CURVE

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INDIFFERENCE CURVE•

It may be defned as the locus opoints each representing thedierent combination o to

substitute goods! hich yield thesame utility or le"el osatisaction to the consumer

• #lso $non as the I%& ' utilitycur"e or e(ual utility cur"e

• It depend on consumer choice )

preerence

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consumer

x y utility

# *+ , U- .+ + U

C / 0 U

D 1 .2 U

E * ,3 U

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FOUR BASIC PROPERTIES

EGATIVELY

SLOPED

CO VEX TO

THE ORIGI

O I TER.

&

  O TA GI .

UPPER CURVE

SHOWS

HIGHER LEVEL

OF

SATISFACTIO

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DEMAND FUNCTION

• Demand !" t#e $!mm!ditya"i%e% "!m t#e $!n%ume"&illin'ne%% ( a)ility t!

*u"$#a%e t#e $!mmdity• +uantity demanded ! a

$!mm!dity i% n!t !nly t#eun$ti!n ! PRICE

• BUT al%! in$!me, *"i$e !

"elated '!!d% ,ta%te !

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D4 5674!7y!78!-!#!E!9!U:

• Dx. demand !" item /

• P/ . P"i$e ! item /

• Py . *"i$e ! %u)%titute• P0 . *"i$e ! $!m*lement%

• B . In$!me ! $!n%ume"

• E . P"i$e ex*e$tati!n ! t#eu%e"

•

T . Ta%te !" *"ee""en$e !