John loves to play Candy Crush Saga, more than watching a movie. This is a normal statement in the English language.
Now, if I state “For John, Candy Crush Saga p watching a movieâ€; it may take your minds into some serious work.
The above statement in Economics means that if placed rank wise, playing a certain game shall be ranked better than watching a movie, in terms of satisfaction provided to the person.
A few months back, I was returning from my college during summer. It was dead hot, and the scorching heat almost paralyzed my senses. So, I decided to have something cool that could make me drool and take away my tiredness. I approached a coffee shop to have some cold coffee, but unknowingly, my eyes went to an ice cream parlor nearby.
For 20 long minutes, I just could not make up my mind on what should I have. I finally decided to eat ice cream. So, I preferred ice cream over cold coffee, because for me ice cream provided more satisfaction, or in an economist’s term, “more utility†than cold coffee.
Definition of preference in terms of economics
Preferences in economics are basically an order wise ranking of the alternatives, or goods, or services based on the amount of happiness, satisfaction, and utility which is procured. The trait for individual preferences homework answers wholly and completely depends upon factors considering tastes, and variables such as prices, demand, supply or even income of a person.
Take an example of mangoes. “A†is an engineer in a big company, earning hefty amounts every month. Now, 1 pound mangoes cost 12$, and the same amount of jackfruit costs 20$. So, theoretically speaking, “A†should follow the concept of luxury goods and buy jackfruits, but in this case, his preference for mangoes is way more than jackfruits, hence proving that the only consideration which matters in preferences, is taste factors.
Therefore, a more theoretical definition of preferences would be – “Preferences are subjective and individual tastes, calculated by the utility derived, for different categories of goods; which the consumers rank on the basis of utility received.â€
The concept of utility; Total and Marginal
After a long week of school, weekends are eagerly awaited, aren’t they? Well, to be honest, nothing can be cooler and calmer than a Saturday, yeah Friday nights are awesome as well. So, on the sixth day of the week, your choices of leisure might be watching television all day long, or going for a movie, or simply taking long naps.
Therefore, manifesting the preferences homework answers of that individual, he or she will assign different degrees of utility for the three different activities. It can be said without any doubt that no two individuals can have comparable utilities, and quantifiable measurement is not plausible in any case. Hence, economists like Paul Samuelson have considered utility as a unit less measure, which has been found handy in elaborating the theories of consumer choices.
Total utility is basically the amount of satisfaction received by an individual, after ingesting certain goods or services. Marginal utility is the addition of “utility†in the total utility, or in simpler words, the extra utility arising due to the individual consuming “one more unit†of the same good or service.
The law of diminishing marginal utility
After a tedious session of baseball practice, Paul returns to his home and drinks one full glass of orange juice. The consumption of orange juice amounts to total utility for Paul, but he is not satisfied yet. He drinks another glass, thus procuring marginal utility after having one more unit of that good; you getting me? However, a third glass may also result in utility, but not as much as the second glass.
The fourth one may be left unfinished. So you can see that utility is decreasing when units are increasing. This is the law of diminishing marginal utility, which states “The marginal utility received after consuming back to back units of the preferred good or service tends to decrease, as the quantity of units increases.â€
The preferences homework answers shall enable a better understanding of the concept of consumer choices, utility, and practicality.
Mapping preferences through indifference curves
Francis Edgeworth and Vilfredo Pareto laid down the concept of representing inputs on a graphical aspect, hence drawing the curves way back in the 1900s. One of the ulterior motives of mapping is to identify the preferences, for a bundle of goods or services, at individual, as well as market perspectives. So what does an indifference curve actually imply? Let us find out.
Implication and definition of an indifference curve
An indifference curve basically implies that the points in the curve are a bundled series of goods, for which, the individuals are indifferent in nature, i.e. preferences homework answers are not comparable. An example would be cigarette and chocolate. Supposedly, Adam does not prefer any one good over another and does not care about the rank wise consumption of either. According to Adam, “Cigarette I Coffee,†meaning that in regard to utility and complete preferences, both goods are indifferent to each other.
Ok, so you are a chocolate lover and can finish up 1 bar of Dairy Milk in one go. Now, your aunt gifts you an identical chocolate with the exact taste as that of a Dairy Milk, would you bother enough to prefer one good over another? Obviously not. Therefore, in this scenario, the preferences are said to be reflexive.
So a basic definition of an indifference curve would be – “A curve, which shows the integration of two goods, providing the purchaser with uniform satisfaction and utility is called an indifference curve.â€
Some facts and figures regarding preferences and indifference curve
Have you ever imagined why does an indifference curve is convex to the origin, or why does it slope downward from left to right? Come let us find out.
- Preferences are mostly incomparable and depend on taste factors only. Therefore, the curves are negatively sloped because of the fact that the consumer gives up some units of good Y while increases units of good X, thus maintaining balance of utility.
- The indifference curve is convex to the origin because the preferences homework answers are being substituted by X for Y; where the law of diminishing marginal utility comes into play.
- The curve, farther from the origin attains more utility than the one nearer to the origin.
There is a confusion among many that how can there be same indifference curves for different preferences. Let me explain. A mathematician likes integer and physics, but hates literature and grammar; while a novelist likes literature and grammar but hates integer and physics. These fellows have grouped things, but their rankings inversely differ, therefore suggesting that both will have same indifference curves, but different preferences.
Well, preferences homework answers play an important role in economics; determining consumer choices and satisfaction levels. So, the next time you are in a dilemma whether to play baseball or go shopping or watch movies, do not forget to measure total and marginal utility while deciding your preferences, because economics always helps.