Supply is of the scarce goods. It is the amount of a commodity that sellers are able and willing to offer for sale at different prices per unit of time. In the words of Meyer “Supply is a schedule of the amount of a good that would be offered for sale at all possible prices at any period of time; e.g., a day, a week, and so on”. Distinction between Supply and Stock. Here, it seems necessary... 

The word demand is so common and familiar with every one of us that it seems superfluous to define it. The need for precise definition arises simply because it is sometimes confused with other words such as desire, wish, want, etc. Demand in economics means a desire to possess a good supported by willingness and ability to pay for it. If you have a desire to buy a certain commodity, say, a car, but... 

Marginal Rate of Substitution (MRS): The concept of marginal rate of substitution (MRS) was introduced by Dr. J.R. Hicks and Prof. R. G. D. Allen to take the place of the concept of Diminishing Marginal Utility. Allen and Hicks are of the opinion that it is unnecessary to measure the utility of a commodity. The necessity is to study the behavior of the consumer as to how he prefers one commodity to... 

An Indifference Map: A graph showing a whole set of indifference curves is called an indifference map. In the given figure three indifference curves IC1, IC2 and IC3 have been shown. The various combination of goods of wheat and rice lying on IC1 yield the same level of satisfaction to the consumer. The combination of goods lying on higher indifference curve IC2 contain more of both the goods wheat... 

The Construction of Indifference Curves: The consumer’s preferences can be shown in a diagram with an indifferences curve. The indifferences curve shows nothing about the absolute amounts of satisfaction obtained. It merely indicates a set of consumption bundles that the consumer views as being equally satisfactory. In the given figure, we measure the quantity of wheat along X-axis (in kilograms)... 

Concept of Ordinal Utility: The indifference curve indicates the various combinations of two goods which yield equal satisfaction to the consumer. By definition, an indifference curve shows all the various combinations of two goods that give an equal amount of satisfaction to a consumer. The indifference curve analysis approach was first introduced by Slustsky, a Russian economist in 1915. Later on... 

Dr. Alfred Marshall-was of the view that the law of demand and so the demand curve can be derived with the help of utility analysis. He explained the derivation of law of demand (i) in the case of a single commodity and (ii) in the case of two or more than two commodities: In the utility analysis of demand, the following assumptions are made: Assumptions (1) Utility is cardinally measurable. (2) Utilities... 

Consumer’s Equilibrium Cardinal Utility Approach  The principle of equal marginal utility occupies an important place in the cardinal utility analysis. According to this, a consumer is in equilibrium when he distributes his given money income among various goods in such a way that marginal utility derived from the last rupee spent on each good is the same. The Marshallian approach to consumer’s... 

Law of diminishing marginaL utility when a good is free: The law of diminishing marginal utility describes a familiar and fundamental tendency of human behaviour. The law of diminishing marginal utility states that, “as a consumer consumes more and more units of a specific commodity, the utility from the successive units goes on diminishing”. Mr. H. Gossen, a German economist, was the first to... 

Total Utility and Marginal Utility: People buy goods because they get satisfaction from them. This satisfaction which the consumer experiences when he consumes a good, when measured as number of utils, is called utility. It is here necessary to make distinction between total utility and marginal utility. Total utility (TU): Total utility is the total satisfaction which a consumer derives from the consumption...