Limitations to Indifference Curve Analysis
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MICROECONOMICS
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Limitations to Indifference Curve Analysis |
The indifference curve analysis has been widely accepted by the Modern economists and is helpful in the explanation of many economic phenomena. Hicks, Allen & others claim that the indifference curve analysis is superior to the Marginal Utility analysis as it is not based on the unrealistic assumption that consumers can measure the satisfaction they get from each unit they buy.Replacing the assumption of Cardinal mesurement of utility by ordinal measurement is a definite improvement. Howevever in that case, Marginal Utility becomes non-measurable.As per George J. Stigler, "the indifference curve analysis assumes only that the consumer is able to decide
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Learning Objectives |
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Learning Goal 2: to establish the law of demand without the use of indifference curves on the basis of revealed preference axioms.
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Further Readings |
Source: P.A. Samuelson,’A note on the Pure Theory of Consumers’ Behaviour’, Econometrica NS.5(1938) Varian, H. (1992) Microeconomic Analysis, Third edition, New York: Norton, Section 8.7
