In the short run, capital is a fixed factor of production and only labour can be varied by firms to change output. The Law of Variable Proportions holds in the…
Production can be defined as the process by which inputs are used to make outputs. Inputs, also known as factors of production, include resources such as labour, capital and raw…
Price control refers to government intervention in the market where a price higher or lower than the equilibrium price is fixed by the government to protect the interests of the…
Market equilibrium is a situation where the quantity demanded of a commodity is equal to its quantity supplied. The price and quantity associated with this equilibrium are known as equilibrium…
In economics, the concept of elasticity holds special significance. Economists deal with various types of elasticity such as price or income elasticities of demand. In many cases, it is preferred…
The theory of demand and supply includes the law of demand and the law of supply. These laws explain the behaviour of demand and supply in response to changing prices.…
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.…
Revealed preference provides an alternative viewpoint to consumer preferences as compared to cardinal or ordinal utility analysis. Ordinal utility analysis vs Revealed Preference The ordinal utility analysis explains consumer choice…
Ordinal utility analysis and indifference curves were developed to overcome the shortcomings of the cardinal utility analysis, which is based on the unrealistic assumption that utility can be accurately measured…
Cardinal utility analysis attempts to explain the logic behind consumer behaviour by attaching value to the utility derived from the consumption of a commodity. By consuming a commodity that individuals…
