Normal Goods: Goods whose demand increases when income increases. For eg, Branded clothes, smartphones. As your income rises, you tend to buy more branded clothes. Inferior Goods:Goods whose demand decreases when income increases. For eg,…
Theories of Demand in Microeconomics In microeconomics, the theories of demand explain how consumers decide what and how much of a good or service to buy, given their income and the prices of goods. Here…
It was developed by Kelvin Lancaster in 1966 It is also called the attribute approach of demand analysis According to Lancaster, consumers get utility not from the product itself but from the attributes/characteristics of the…
Demand Curve Derivation Using RPT Revealed Preference Theory (RPT) can also be used to derive the demand curve, where the demand curve is derived by observing the actual behavior of the consumer under different price…
Economic Theories: Role and Assumptions Economic Theories An economic theory is a systematic explanation of economic behavior or economic phenomena. If the theory explains the behavior of an individual economic unit, it is a microeconomic…
Deductive Method in Economics The deductive method is a systematic approach to studying an economic issue where the analysis moves from general to specific. In this method, we do have a general theory, idea, or…
Revealed Preference Theory(RPT) The Revealed Preference Theory (RPT) was developed by Paul Samuelson as an alternative to the earlier theories of consumer behavior, such as the Cardinal Approach and Ordinal Approach. Samuelson criticized them for being…