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Which is not an assumption of the theory of demand based on analysis of indifference curve?
a) given scale a preference as between different combinations of goods.
b) diminishing marginal rate of substitution
c) constant marginal utility of money
d) consumers would always prefer more of a particular good to less of it, other things remaining same?
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Which is not an assumption of the theory of demand based on analysis o...
Assumption of the Theory of Demand

Constant Marginal Utility of Money
One assumption of the theory of demand based on the analysis of indifference curves is the constant marginal utility of money. This assumption suggests that the marginal utility of money remains constant as more of it is acquired. In other words, each additional unit of money provides the same level of satisfaction or utility to the consumer.
This assumption is essential in understanding how consumers make choices between different goods and services based on their preferences and budget constraints. By assuming a constant marginal utility of money, economists can analyze how individuals allocate their income to maximize their overall satisfaction or utility.
However, in reality, the marginal utility of money is not constant. As individuals acquire more money, the satisfaction or utility derived from each additional unit of money tends to decrease. This phenomenon is known as diminishing marginal utility of money, which contradicts the assumption of constant marginal utility of money in the theory of demand based on indifference curves.
Therefore, while the theory of demand based on indifference curves may assume constant marginal utility of money for simplicity and analytical purposes, it is important to recognize that this assumption may not hold true in real-world scenarios.
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Which is not an assumption of the theory of demand based on analysis of indifference curve?a) given scale a preference as between different combinations of goods.b) diminishing marginal rate of substitution c) constant marginal utility of moneyd) consumers would always prefer more of a particular good to less of it, other things remaining same?
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Which is not an assumption of the theory of demand based on analysis of indifference curve?a) given scale a preference as between different combinations of goods.b) diminishing marginal rate of substitution c) constant marginal utility of moneyd) consumers would always prefer more of a particular good to less of it, other things remaining same? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which is not an assumption of the theory of demand based on analysis of indifference curve?a) given scale a preference as between different combinations of goods.b) diminishing marginal rate of substitution c) constant marginal utility of moneyd) consumers would always prefer more of a particular good to less of it, other things remaining same? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which is not an assumption of the theory of demand based on analysis of indifference curve?a) given scale a preference as between different combinations of goods.b) diminishing marginal rate of substitution c) constant marginal utility of moneyd) consumers would always prefer more of a particular good to less of it, other things remaining same?.
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