Tag Archives | Consumption Theory

Consumption Theory on Revealed Preference Approach

In this article we will discuss about how consumption theory can be examined in terms of revealed preference approach. The negative slope of the demand curve can be demonstrated from revealed preference approach. On the basis of the assumption that the consumer behaves consistently, we can show that the substitution effect of a change in the relative prices of commodities [...]

By |2017-01-13T05:58:24+05:30January 13, 2017|Consumption Theory|Comments Off on Consumption Theory on Revealed Preference Approach

Price Consumption Curve and Price Elasticity Demand | Economics

In this article will update you about the relationship between price consumption curve and price elasticity of demand. It is possible to determine whether an individual's demand curve for a commodity is elastic, unitary elastic or inelastic directly from the slope of the PCC. We know that the PED (Ep) is given by the percentage change in the quantity demanded [...]

By |2017-01-13T05:58:24+05:30January 13, 2017|Relationship|Comments Off on Price Consumption Curve and Price Elasticity Demand | Economics

Income Effect and Substitution Effect | Consumption Theory

The upcoming discussion will update you about the difference between income effect and substitution effect. It is a well-known proposition of consumption theory that a ra­tional consumer reaches equilibrium when he chooses the bundle of goods that maximises his satisfaction. He will continue to consume the goods in the proportions indicated by the point of tangency between the budget line [...]

By |2017-01-13T05:58:24+05:30January 13, 2017|Consumption Theory|Comments Off on Income Effect and Substitution Effect | Consumption Theory
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