| Course Code | (8412) |
| Course Title | Macro Economics |
| Level | BBA |
| Semester | Autumn 2023 |
| Last Date To Submit | November 2023 |
Note: We Can Not Post The Solution Of The Assignment because AIOU is Not Allowed To Share The Solution Of the Assignment. We Are Just Sharing The Question about the Assignment. Macro Economics (8412) BBA Spring & Autumn 2023 Solved Assignments.
The difference between micro and macroeconomics is simple. Microeconomics is the study of economics at an individual, group or company level. Macroeconomics, on the other hand, is the study of a national economy as a whole. Microeconomics focuses on issues that affect individuals and companies. This could mean studying the supply and demand for a specific product, the production that an individual or business is capable of, or the effects of regulations on a business.
Macroeconomics focuses on issues that affect the economy as a whole. Some of the most common focuses of macroeconomics include unemployment rates, the gross domestic product of an economy, and the effects of exports and imports. Does this make sense? While both fields of economics often use the same principles and formulas to solve problems, microeconomics is the study of economics at a far smaller scale, while macroeconomics is the study of large-scale economic issues.
Aiou Solved Assignments code 402 Autumn & Spring 2023
Q NO: 2 (a) Explain the measurement of utility and its different concepts.
(b) What are the assumption and exceptions for the law of diminishing marginal utility?
It’s difficult to measure a qualitative concept such as utility, but economists try to quantify it in two different ways: cardinal utility and ordinal utility. Both of these values are imperfect, but they provide an important foundation for studying consumer choice. In economics, utility simply means the satisfaction that a consumer experiences from a product or service. Utility is an important factor in decision-making and product choice, but it presents a problem for economists trying to incorporate it into microeconomics models. Utility varies among consumers for the same product, and it can be influenced by other factors, such as price and the availability of alternatives.
Cardinal utility is the assignment of a numerical value to the utility. Models that incorporate cardinal utility use the theoretical unit of utility, the util, in the same way that any other measurable quantity is used. In other words, a basket of bananas might give a consumer a utility of 10, while a basket of mangoes might give a utility of 20. Macro Economics (8412) BBA Spring & Autumn 2023 Solved Assignments.
(b) What are the assumption and exceptions for the law of diminishing marginal utility?
The downside to cardinal utility is that there is no fixed scale to work from. The idea of 10 utils is meaningless in and of itself, and the factors that influence the number might vary widely from one consumer to the next. If another consumer gives bananas a util value of 15, it doesn’t necessarily mean that he likes bananas 50% more than the first consumer. The implication is that there is no way to compare utility between consumers.
One important concept related to cardinal utility is the law of diminishing marginal utility, which states that at a certain point, every extra unit of good will provides less and less utility. While a consumer might assign his first basket of bananas a value of 10 utils, after several baskets the additional utility of each new basket might decline significantly. The values that are assigned to each additional basket can be used to find the point at which utility is maximized or to estimate a customer’s demand curve.
An alternative way to measure utility is the concept of ordinal utility, which uses rankings instead of values. The benefit is that the subjective differences between products and between consumers are eliminated and all that remains are the ranked preferences. One consumer might like mangoes more than bananas, and another might prefer bananas over mangoes. These are comparable if subjective, preferences.
Macro Economics (8412) BBA Spring & Autumn 2023 Solved Assignments
The utility is used in the development of indifference curves. Which represent the combination of two products that certain consumer values equally and independently of price. For example, a consumer might be equally happy with three bananas and one mango or one banana and two mangoes. These are thus two points on the consumer’s indifference curve.
The utility is a loose and controversial topic in microeconomics. Generally speaking, utility refers to the degree of removed discomfort or perceived satisfaction. So that an individual receives from an economic act. For example, a consumer purchases a hamburger to stop the discomfort of hunger and to enjoy eating.
All economists would agree that the consumer has gained utility by eating the hamburger. Most economists would agree that human beings are, by nature, utility-maximizing agents; human beings choose between one act or another based on each act’s expected utility. The controversial part comes in the application and measurement of utility.
Cardinal and Ordinal Utility
The development of utility theory begins as a logical deduction. Voluntary transactions only occur because the trading parties anticipate a benefit (ex-ante); the transaction wouldn’t happen otherwise. In economics, “benefit” means receiving more utility.
Economists also say that human beings rank their activities based on utility. A laborer chooses to go to work rather than skip it because he anticipates his long-run utility to be greater as a result. A consumer who chooses to eat an apple rather than an orange must value the apple more highly, and thus anticipates more utility from it.
The ranking of utility is known as ordinal utility. It is not a controversial topic; however, most microeconomic models also use cardinal utility, which refers to measurable, directly comparable levels of utility. Cardinal utility is measured in utils to transform the logical to the empirical. The ordinal utility might say that ex-ante, the consumer prefers the apple to the orange. Cardinal utility might say that the apple provides 80 utils while the orange only provides 40 utils.