Micro Economics

Law of Equi-Marginal Utility : Criticism and Limitation

CRITICISMS, LIMITATIONS OR EXCEPTIONS OF LAW OF EQUI-MARGINAL UTILITY

Following are the main reasons for the criticism of the Law of Equi-marginal utility by H. H. Gossen. Although, it is a basic law of economics and consumers knowingly or unknowingly are compelled, to follow this law. This law is applicable in every field of economic analysis.
Read More »Law of Equi-Marginal Utility : Criticism and Limitation

Definition of Law of Equi-Marginal Utility

  • by sadiq

How is the Law of “Equi-marginal utility” helpful in maximizing the utility of a consumer?

INTRODUCTION OF LAW OF EQUI-MARGINAL UTILITY

We know that the wants of every man are unlimited. Wants arise again and again but man has limited means (income) to fulfill his wants and means have alternative uses. Thus, man always faces the problem of distribution of limited means of alternative uses, on his wants; so that, he may get maximum satisfaction (or utility). Law of Equi-Marginal Utility presents the solution to this problem. This law states that if a person, wishes to get maximum satisfaction from his income, he should spend his income on different items, in such a way that the utility of the last unit of money spent on each commodity, should be equal or almost equal. This law of consumption was propounded by a French Economist, H. H. Gossen in 1854 and it is also known as the Second Law of Gossen.
Read More »Definition of Law of Equi-Marginal Utility

Marginal Utility : Definition and Classification

Definition of Marginal Utility

Marginal Utility is the utility which is derived from the consumption of an additional unit of a commodity. In other words, it is the addition to total utility, resulting from adding one unit to the consumption of a commodity.

Example : Ram consumes 6 ice creams at a time. In this case, 6 ice creams will be the marginal unit and utility derived by him from adding one unit to the consumption of a commodity.

Read More »Marginal Utility : Definition and Classification

Utility – Concept and Characteristics of Utility

  • by sadiq

Meaning of Utility

Utility means the power that satisfies any want. It is such an internal quality; which is found in all commodities desired by a person. The quality (power or capability) of a commodity which satisfies the human want; directly or indirectly is called Utility. Those commodities, which have wants satisfying power are called ‘Useful Commodities‘.
Read More »Utility – Concept and Characteristics of Utility

Macro Economics – Importance, Limitations and Difficulties

  • by sadiq

Meaning of Macro Economics

The word macro means big. Thus, in Macro Economics, either the whole economy is studied or those big units which are related to the economy as a whole.

Definition

In the words of Prof. Boulding

Macro Economics deals not with individual quantities as such but aggregates of these quantities, not with individual incomes but national income, not with individual output but with national output.

Thus, macro economics studies the various groups related to the whole economy, like, national savings, national income, national consumption, total employment, total production, etc..
Read More »Macro Economics – Importance, Limitations and Difficulties

Micro Economics – Importance, Limitations and Difficulties

Introduction to Micro Economics

In the present times, the study of economics is done from two viewpoints namely Micro and Macro. From the first viewpoint, the economic problems of various units, like – individuals, families, firms etc. are studied individually, whereas; from the second viewpoint, the same units of persons, families, firms etc., are studied in a combined form. Micro Economics is concerned with a specific, particular or an individual whereas; Macro Economics is concerned with a group.

Meaning

The word micro means very small portion. From this point of view, micro economics is the study of specific economics units of the whole economy. Under this, a commodity, a consumer, a firm or an industry is studied individually.
Read More »Micro Economics – Importance, Limitations and Difficulties