Limitations to Indifference Curve Analysis

From WikiEducator
Jump to: navigation, search


SLMtitle.png Limitations to Indifference Curve Analysis

The indifference curve analysis has been widely accepted by the Modern economists and is helpful in the explanation of many economic phenomena. Hicks, Allen & others claim that the indifference curve analysis is superior to the Marginal Utility analysis as it is not based on the unrealistic assumption that consumers can measure the satisfaction they get from each unit they buy.Replacing the assumption of Cardinal mesurement of utility by ordinal measurement is a definite improvement. Howevever in that case, Marginal Utility becomes non-measurable.As per George J. Stigler, "the indifference curve analysis assumes only that the consumer is able to decide

SLMobj.png Learning Objectives
After reading this chapter, you are expected to learn about:

Learning Goal 1: Demonstrate an understanding and significance of the concept of Revealed Preference.

Learning Goal 2: to establish the law of demand without the use of indifference curves on the basis of revealed preference axioms.


Icon casestudy.gif
Case Study
Enter your text here

SLMact.gif Activity
Write your activity here




SLMsaq.gif Self-Assessment Questions (SAQs) {{{n}}}

SLMsum.png Results

MU KEY.jpg Key Terms

Icon activity.jpg

Extension exercise

Enter your text here

SLMref.png Further Readings

Source: P.A. Samuelson,’A note on the Pure Theory of Consumers’ Behaviour’, Econometrica NS.5(1938) Varian, H. (1992) Microeconomic Analysis, Third edition, New York: Norton, Section 8.7