Equilibrium position of ordinalist and cardinalist approaches in consumer behavior theory

Economics

Table of Contents
Microeconomics..............................................................................................................................3
Question 1....................................................................................................................................3
a) Equilibrium position of the ordinalist and the cardinalist approaches in the theory of
consumer behavior...................................................................................................................3
b) Usefulness of the concept of elasticity’s.............................................................................4
Macroeconomics..............................................................................................................................8
Question 3:...................................................................................................................................8
a) Inflation...............................................................................................................................8
b) Costs of inflation.................................................................................................................8
References......................................................................................................................................14

Microeconomics
Question 1
a) Equilibrium position of the ordinalist and the cardinalist
approaches in the theory of consumer behavior
Ordinal Approach to Consumer Equilibrium
The systematic approach to consumer equity shows that harmonization has been achieved when
customers increase the overall need (performance) undetermined payment rate and current cost
of goods and campaigns. Procedure identifies two conditions for customer balance: the required
condition or position for the main application and an additional condition or condition for the
next application.
Ways to achieve balance:
Individual openings: Individual openings present another combination of two options (elements)
that offer the customer the same level of performance (benefit). Therefore, clients cannot use two
things with a strong connection.
Small scale of substitution (MRS): The margin transfer rate determines how quickly an item is
exchanged for another object with the aim of keeping the overall gain (behavior) as before
(Banwari, 2020).
Cardinal Approach to Consumer Equilibrium
The cardinal approach to consumer equity is to achieve equity when customers get maximum
satisfaction from specific assets (money) and different conditions. Buyers should be happy about
the cost allocation, so the ongoing unit spent on everything offers the same level of usage.

It is softer to understand the concept of how customers are transformed as a one-size-fits-all and
a multi-subject model. In an article model, consumer attire is specified when one item is fired,
although, in a multivariate model, a customer balance is specified when at least two articles are
consumed (Barnett, 2003).
1. Buyer balance - Product model: The item could be used by a buyer with a share of assets
(money) (such as an X). For the buyer, payment has equal benefits and item X can be exchanged
in an appropriate or large X structure. In case the negligible profit (MUx) of item X outweighs
net income (X) of cash, the expanding supply benefits of a buyer are in cash to pay for products .
2. Customer Balance - Multipurpose Model: The single item model relies on the irrational
assumption that the buyer is using the item. In any case, consumers eat a ton of goods and
campaigns. This model clarifies how customers who use multiple items reach their balance.
Clients are believed to have limited cash payments, and items received from a variety of items
are subject to limited income (Barnett, 2003).
b) Usefulness of the concept of elasticity’s
Elasticity is an essential cash sign, especially for product or management providers, as it reflects
what a product or administrator uses when costs fluctuate. In the phase where an object is
polymorphic, the value changes rapidly to the desired level. At a time when an item is volatile,
the amount shown may not change whether or not the cost of the item fluctuates. Switching to
flexible products means that demand increases as costs decrease and demand decreases as costs
increase.
Organizations operating in very poor operations offer changeable articles and administrations as
they typically set costs or comply with all-inclusive assessments. As the cost of an item or
administration reaches a level of flexibility, buyers and sellers quickly change their interest in
that item or handling. The other side of flexibility is uncertain. At a time when an item or
administration is unstable, sellers and buyers are less likely to change their interest in an item or
handling due to cost fluctuations.
The importance of application elasticity is as follows: