Test: Theory Of Consumer Behaviour - 3 - Commerce MCQ

Utility is a subjective concept and varies from person to person, at different times and at different places. There cannot be a standardised measure for utility. Therefore, the point that utility always measurable is not true.

Alfred Marshall was the dominant figure in British economics from about 1890 until his death in 1924.His specialty was microeconomics—the study of individual markets and industries, as opposed to the study of the whole economy.
It was Alfred Marshall who first discussed the role played by the theory of utility in the theory of value. In Marshall's theory, the concept of utility is cardinal.

In cardinal utility approch utility is measured in numerical terms.And unit used for measurement is known as utils.

On indifference curve,consumer gets same satisfaction from each combination hence he is indifferent towards all combinations.

In order to increase the consumption of one good,other good must be sacrificed as utility level through out the indifference cure has to be same.Due to inverse relation between two goods indifference curve slopes downwards from left to right.

Consumer surplus happens when the price consumers pay for a product or service is less than the price they're willing to pay. Consumer surplus is the benefit or good feeling of getting a good deal.
Consumer surplus always increases as the price of a good falls and decreases as the price of a good rises.

As per law of dimnishing marginal utility, as the consumer goes on conuming MU derived from each succesive unit goes on falling,becomes zero and finally turns negative 

utility represents satisfaction experienced by the consumer from a good.

Point of Satiety is defined as '' the point where marginal utility of any commodity is zero''. Thus it is a point where satisfaction of any commodity is zero.

Average utility is nothing but utility derived by per unit of consumption.

Measurement unit for utility is known as utils.

MU is the concept used in cardianl utility approch which was given by alferd marshal.

An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility.

Consumer surplus, also called social surplus and consumer's surplus, in economics, the difference between the price a consumer pays for an item and the price he would be willing to pay rather than do without it.

In the case of normal goods indifference curve is always convex.

As per Alferd marshall MU of money is constant.

consumer equilibrium is a state of balance  for the consumer from where he doesn’t want to move either forward or backward. This is achieved when consumer gets maximum satisfaction with given income and he doesn’t want to change his way of existing expenditure.

Total utility is the total satisfaction received from consuming a given totalquantity of a good or service. It is the sum of marginal utility which can be expressed as:

TU = (MU₁ + MU₂+ ............ MU_n)

A budget constraint represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income. Consumer theory uses the concepts of a budget constraint and a preference map to analyze consumer choices.

An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.

There is a negative relation between price of the commodity and its quantity demanded,due to which elasticity coffecient is always negative.

Utility represents satisfaction experienced by the consumer from a good.

 The Ordinal Utility approach is based on the fact that the utility of a commodity cannot be measured in absolute quantity, but however, it will be possible for a consumer to tell subjectively(by ranking) whether the commodity derives more or less or equal satisfaction when compared to another.

IC slopes downward because as the consumer increases the consumption of one commodity, he has to give up certain units of other commodity in order to maintain the same level of satisfaction.

two indifference curves represent two different levels of satisfaction. If these indifference curves intersect each other, the intersection will represent same level of satisfaction, which is impossible.