Econometrics And Econometricians December 01, 2021

Revenue curves under Different markets

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Broadly markets are of three types as follows: 1. Perfectly competitive market 2.Monopoly market 3.Monopolistic competitive market 1.Revenue curve under perfectly competitive market or Perfect competition: Under perfect competition, a firm is a price taker. It cannot influence /change the market price. AR and MR curve 2. Revenue Curve Under Monopoly: A monopolist is a price maker. He is the single seller of the product in the market. Under monopoly, however, if a firm desires to sell more , he has to reduce price of the product. Thus, there is  negative relationship  between price of the product na ddemand for the product in a monopoly market. Accordingly, a Firm’s AR curve (or the demand curve or the priice line) slopes downaward.  3. Revenue Curve Under Monopolistic Competition: In a Monopolistic Competitive market, producers sell “differentiated product” which means products whose close substitutes are easily available in the market. Under Monopolistic Compet...
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Consumer’s Equilibrium- Indifference Curve Analysis

Consumer’s equilibrium is defined as a situation when he maximizes his satisfaction spending his given income across different goods with given prices. In indifference curve (IC) analysis, level of satisfaction is never expressed in numbers or satisfaction is never measured. The level of satisfaction derived by the consumer consuming various commodity bundles are only ranked or compared as equal, less than or more than in different situations.

Following are the differences between Utility analysis and Indifference Curve Analysis:

Utility Analysis

Indifference Curve Analysis

Utility Analysis assumes utility to be cardinal which can be expressed and measured in exact units.

In Indifference Curve analysis, the level of satisfaction is only ranked or compared as equal, less than or more than in different situations.

Utility Analysis is not realistic as nobody measures level of satisfaction in numerical terms.

Ordinal Utility is more realistic.

Utility analysis uses the concept of Marginal Utility, law of diminishing marginal utility, law of equi-marginal utility to determine consumer’s equilibrium.

IC analysis uses the concept of IC, budget line to determine consumer’s equilibrium.

 

Concept of Indifference Curve: Indifference curve is a locus of all such points which show different combinations of two commodities offering the same level of satisfaction to the consumer. 


Properties of indifference Curve:

(I) IC slopes Downward from left to right

(II) IC is strictly convex to the Origin

(III) Higher IC represents Higher Level of Satisfaction

(IV) ICs do not touch or intersect each other

(V) IC curves do not touch the Axes 

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Revenue curves under Different markets

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