Introduction

Sun, 13 Sep 2009 18:47:20 +0100

Each consumer has to face the problem of multiplicity of wanst and limited income. In such state of affairs it is the desite of eash consumer to maximize his satisfation in the presence of income constraint. Whenever a consumer maximizes his satisfaction, he is satisfied with his spending pattern, dows not ahve any tendency to change his style of expenditures, he is said to be in equilibrium in economic literature. to describe consumer's equilibrium we have basically tow main approaches:
(1) The Cardinal Approach (2) The Ordinal Approach

The Cardinal Approach / Classical Approach / Utility Approach
According to this theory, satisfaction and utiity can not measured inot numbers. for example, if a consumer drinks a glass water , the satisfaction he derives from that glass of water can be represented into numbers like 1,2,3,4,5,6..........etc. in mathematics such numbers are called cardinal numbers.

The Ordinal Approach / Neo Classical Approach

According to this approach, the satisfaction and utility can not be measured. it is only mental phinomina. this theroy is given by new economists. there for it is also know as neo classical approach.

chap-02

Introduction