The utility which a consumer derives from the consumption of each additional unit of a commodity keeps decreasing with every increase in the stock of the commodity which he already has”.

1. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Affiliated to Institution of G.G.S.IP.U, Delhi
BBA BE-I 102
Assistant Professor
Sarita chawla

2. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Cardinal Utility Approach: Total,
Marginal, Average Utility
Relationship among Total Utility, Marginal Utility &
A.U.
-10
-5
0
5
10
15
20
25
30
35
1 2 3 4 5 6 7 8 9
Series1
Series2
Series3
Tu
AU
Mu

3. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
• The utility which a consumer derives from the
consumption of each additional unit of a
commodity keeps decreasing with every
increase in the stock of the commodity which
he already has”.
Law of Diminishing Marginal Utility

4. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Ordinal Utility Approach
Indifference Curve

5. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Indifference Map

6. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Assumption of indifference curve
Analysis
• Non Satiety
• Transitivity
• Diminishing Marginal rate of substitution
• Two commodities
• Ordinal Utility
• Divisibility
• Rationality

7. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Consumer Equilibrium or Budget Line
Consumer Equilibrium

8. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
Law of Demand
The law of demand can be illustrated through a demand curve.
Y D
P1
Price P2
0 Q1 Q2 X

9. TRINITY INSTITUTE OF PROFESSIONAL STUDIES
Sector – 9, Dwarka Institutional Area, New Delhi-75
• The extent to which a good responds to a
price change in called its price elasticity. The
goods which respond more are said to have
higher elasticity and the goods which are less
sensitive to the changes in price are said to be
less elastic.
Elasticity of Demand