Measurement of the Elasticity of Demand The measurement of elasticity of demand is the ratio of the percentage change in quantity demanded to the percentage change in price. There are three methods of measuring the elasticity of demand which are as follows Total Outlay Method Proportionate or Percentage Method Point Method or Geometrical Method
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Exceptions to The Law of Demand From the analysis of The Law of Demand, it is clear that in ordinary conditions, demand increases on decrease in price of a commodity and the demand curve falls downwards from left to right. But there are some exceptions to the law of demand and sometimes, even on decrease
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Definition of The Law of Demand The law of demand states that other things remain the same, a decrease in prices causes an increase in demand and an increase in prices causes a decrease in demand. This law is based on The Law of Diminishing Utility which states that as we keep purchasing a commodity its
Importance of Law of Equi-Marginal Utility The Law of Equi-Marginal Utility has an important place in economics. The importance of concept cannot be ignored even though it is highly criticized. This applies in every field of economics, which is clear from the following
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Criticism, Limitations and Exceptions of The 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
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Law of Equi-Marginal Utility The Law of “Equi-marginal utility” is helpful in maximizing the utility of a consumer. We know that the wants of every man are unlimited. Wants to arise again and again but man has limited means (income) to fulfil his wants and means have alternative uses. Thus, man always faces the problem
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Measurement of Utility The utility is a Psychological and Personal Concept. There is a difference of opinion, on whether measurement of utility can be done or not. The followings are the two approaches prevalent in this regard.
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Definition of Total Utility At a given time the overall utility derived from the consumption of all units of a commodity is called Total Utility.
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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,
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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
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