MARGINAL RATEOF SUBSTITUTION

MARGINAL RATEOF SUBSTITUTION From schedule given above, we can see that when we move from one combination of the two commodities to another, we arc in fact substituting some units of one commodity for some units of another. We can also work out the rate at which this...

DEMAND CURVE

DEMAND CURVE We give here a demand curve of an imaginary consumer. The demand curve simply hows ho the quantity purchased varies with the  variation in price. Along OX are represented the quantities of the good purchased and along OY the prices. It  be seen  that at...

Meaning of Demand

Meaning of Demand It is necessary to distinguish between demand and desire or need. A sickly child needs a tonic; a peon desires to have a TV set. But such needs and desires do not constitute demand, When, however. the person desiring is willing and able to pay for...

CONSUMER’S EQUILIBRIUM

CONSUMER’S EQUILIBRIUM CONSUMER’S EQUILIBRIUM We have discussed above two important laws of consumption. vil..• the law of diminishing marginal utility and the law of equi-marginal utility in terms of these laws, we can indicate the position...

Practical Importance of the Law

Practical Importance of the Law The Law of SUbstitution, also known as the Law of Equi-Marginal Utility, has a very wide application. It is applicable to the utilisation of time, distribution of assets in various forms and the allocation of resources among various...

Diagrammatic Representation

Diagrammatic Representation The principle of equi-marginal utility can be explained with the help of the diagram  given below. In this figure. along the axis OX. from left to right  on the portion OX) is measured the quantity of the good A and from right to left,  on...