ANALYSIS OF CONSUMER BEHAVIOURORDINAL UTILITY APPROACH

Indifference curve analysis

0 Developed - Edge worth0 It was later preferred by J.R Hicks & R.J.D. Allen0 indifference curve approach is also known as ordinal

utility approach..0 consumer express their utility in terms of preference

not in term of quantity.

ASSUMPTION OF INDIFFERENCE CURVE

0 A consumer is assumed to buy any two goods in combinations.

0 A consumer can rank the alternative combinations and compare their level of satisfaction, and he prefers a combination providing a higher level of satisfaction.

0 Consumer is rational and his choices are transitive.

0 The consumer behavior is assumed to be constant, throughout the analysis.

INDIFFERENCE CURVE

Good X

Good Y

0

An indifference curve may be defined as the locus of various combination of two goods which yield the same total satisfaction to the consumer

INDIFFERENT SCHEDULE

For eg:0 The following table shows the indifference schedule of

combination of biscuits and cups of tea for a consumer.

combination Cups of Tea + Biscuits

ABCDEF

123456

++++++

503826211715

0 1 2 3 4 5 6 70

10

20

30

40

50

60

A

B

C

DE F

CUPS OF TEA

BIS

CUIT

S

X

Y

0

Graphical representation of indifference schedule…

INDIFFERENCE MAP0 A collection of

indifference curve is known as indifference map.

0A higher indifference curve indicates a higher level of satisfaction and vise versa.

Ic1Ic2

Ic3

Goo

d y

Y

Good x X0

Thanks….