Business Jargons

Definition: The Ordinal Approach to Consumer Equilibrium asserts that the consumer is said to have attained equilibrium when he maximizes his total utility (satisfaction) for the given level of his income and the existing prices of goods and services. The ordinal approach defines two conditions of consumer equilibrium: Necessary or First Order Condition and Supplementary or … [Read more...] about Ordinal Approach to Consumer Equilibrium

Definition: 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 whether the commodity derives more or less or equal satisfaction when compared to another. The modern economists have discarded the concept of cardinal utility and instead … [Read more...] about Ordinal Utility

Definition: The Cardinal approach to Consumer Equilibrium posits that the consumer reaches his equilibrium when he derives the maximum satisfaction for given resources (money) and other conditions. A consumer is said to be highly satisfied when he allocates his expenditure in such a way that the last unit of money spent on each commodity yields the same level of utility. The … [Read more...] about Cardinal Approach to Consumer Equilibrium

Definition: The Cardinal Utility approach is propounded by neo-classical economists, who believe that utility is measurable, and the customer can express his satisfaction in cardinal or quantitative numbers, such as 1,2,3, and so on. The neo-classical economist developed the theory of consumption based on the assumption that utility is measurable and can be expressed … [Read more...] about Cardinal Utility

Definition: The Law of Diminishing Marginal Utility states that with the increased consumption of the commodity, the satisfaction derived from each successive unit goes on diminishing. Assumptions of Law of Diminishing Marginal Utility   The law is said to hold true under certain conditions, and these conditions are referred to as the assumptions of the law of … [Read more...] about Assumptions of Law of Diminishing Marginal Utility

Definition: The law of Diminishing Marginal Utility posits that with the more and more consumption of the units of the commodity the utility derived from each successive unit goes on diminishing, provided the consumption of other commodities remain constant. The concept of the law of diminishing marginal utility can be understood through a real life example. Suppose you are … [Read more...] about Law of Diminishing Marginal Utility

Definition: The Marginal Utility refers to the additional benefit (utility) a consumer derives from the consumption of one additional unit of good or service. In other words, marginal utility is the addition to the total utility resulting from the consumption of one additional unit of the commodity. Thus, it can be measured as the change in the total utility obtained from … [Read more...] about Marginal Utility

Definition: The Total Utility refers to the sum of utility that an individual derives from the consumption of all the units of a given commodity at a point or over a period of time. In other words, the total satisfaction derived from the consumption of various units of goods and services is called total utility. Every unit of a commodity has its marginal utility (a utility … [Read more...] about Total Utility

Definition: The "Utility" in Economics means the satisfaction derived or expected to be derived from the consumption of goods and services. The concept of "utility" in economics can be understood in two broad perspectives: from the product’s perspective and the consumer’s perspective. From the product’s perspective, it can be defined as the want-satisfying property of the … [Read more...] about “Utility” in Economics

Definition: The Law of Supply posits that there is a positive relationship between the supply of a commodity and its price, such that the supply of the commodity increases with the increase in its price and decreases with the fall in its price, other things remaining constant. Here, “other things” are the factors that influence the supply of the commodity such as technology, … [Read more...] about Law of Supply