Cardinal and ordinal utility analysis assume that all the variables, such as prices and income, are known with certainty. However, this is not the case in reality. Consumers have to…
The price effect is the combination of both the income and substitution effects. The substitution effect is always positive, however, the income effect can be positive or negative. Therefore, the…
The ordinal utility analysis involves indifference curves and budget lines to determine consumer choice. A consumer will choose the quantity of a commodity that maximizes utility, given the budget constraint.…
