Home › CA Foundation › Business Economics › Theory of Consumer Behaviour › Which is stated as an advantage of indifference …
Which is stated as an advantage of indifference curve analysis over Marshall's marginal utility analysis?
AIt dispenses with measurability of utility
BIt studies only one commodity at a time
CIt assumes constant marginal utility of money
DIt assumes utility is cardinally measurable
Answer & Solution
Correct answer: A. It dispenses with measurability of utility
1. Indifference analysis treats utility as ordinal, so it does not need cardinal measurability.
2. It also studies two goods together and separates income from substitution effects.
3. Cardinal measurability, single-commodity focus, and constant MU of money are features it avoids, so those options are wrong.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit II "Theory of Consumer Behaviour", p.21_
Related questions
At the consumer's equilibrium point in indifference curve analysis, the marginal rate of sIn indifference curve analysis, a consumer attains equilibrium at the point where the budgA point lying inside (below) the budget line indicates that the consumer is:A consumer has Rs.100 to spend on ice cream priced at Rs.20 and chocolate priced at Rs.10.The slope of the budget line is determined by the:Two indifference curves can never intersect each other because intersection would imply thFor two goods that are perfect complements, such as a left shoe and a right shoe, the margWhen two goods are perfect substitutes, their indifference curves take the shape of: