Theory of the firm - Admission/Application Essay Example

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Summary

An indifference map shows a series of curves which depict alternative combination of any two randomly compared characteristics which can be useful for the consumer. Indifference curves further out to the right represent higher levels of utility. They are bound to the origin…

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Subject: Miscellaneous
Type: Admission/Application Essay
Level: Undergraduate
Pages: 5 (1250 words)
Downloads: 2
Author: giuseppe12

Extract of sample "Theory of the firm"

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The criticism of this concept is the difficulty to identify and measure characteristics in an unambiguous way. Personal tastes are visually impossible to quantify. Furthermore, to draw indifference map for a selection of consumers is difficult, and the majority may find it hard to imagine a series of combinations of characteristics between which they were indifferent. Therefore, this can provide only a rough guide to consumer choice. Consumer tastes change rapidly, and how these changes will influence the shape of the indifference curve is difficult to predict.

Through market research this concept could furnish information about consumer attitudes towards their product characteristics thereby affecting the graph. It is also useful for demand forecasting and marketing. Often, markets divide themselves into different market segments with consumers in each segment having similar

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