Eco 101 Online Quiz and Discussion (Utility and others)—-6/3/2023

Ans
1. Utility theory tries to explain the behavior of individual consumer in an economy. Utility is involved in everything we do and we get satisfaction from consuming or using goods or services. This is what utility theory is concerned with: explaining individuals’ choices and measuring satisfaction level from consuming a good or service. The level of satisfaction is measured in units called UTILS.

2. Cardinal school of thought and Ordinal school of thought.
✓ Cardinal utility believes in measuring the satisfaction levels in utils. This approach emphasizes that utility is measurable.
✓ Ordinal utility believes that the satisfaction level cannot be evaluated; however, it can be levelled.

3. The demand for labour is an economic principle derived from the demand for a firm’s output. If a labour productivity increase, firm’s will demand more labour at each wage rate and the firm’s demand for labour itself will increase.

Name:OBUO GRACE OHIUMA
Reg no: 2020/241933
Department: Pure and Industrial Chemistry Email: graceobuo2019@gmail.com
1)Utility theory in economics pertains to the value or worth of a certain good, service, or item. It suggests that goods, services, and items can be ranked according to their usefulness. The premise was initially theorized by Swiss mathematician, Daniel Bernoulli, in the 18th century. Bernoulli founded the idea with regard to the differing values of things. With respect to theory, the utility of an item tends to be closely correlated to its price. An item such as gold, which is very useful and thus has great utility (combined with its scarcity), is very expensive.
2) CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity. Ordinal Utility explains that the satisfaction level after consuming any goods or services cannot be scaled in numbers. However, these things can be arranged in the order of preference.
3) Demand for labor is a concept that describes the amount of demand for labor that an economy or firm is willing to employ at a given point in time. This demand may not necessarily be in long-run equilibrium. It is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage.A profit-maximizing entity will command additional units of labor according to the marginal decision rule: If the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to the total cost, the firm will increase profit by increasing its use of labor. It will continue to hire more and more labor up to the point that the extra revenue generated by the additional labor no longer exceeds the extra cost of the labor. This relationship is also called the marginal product of labor (MPL) in the economics community.

Name: Arthur Philip David
Reg no: 2021/241939
1.) The Elementary theory of utility is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measure quantitative. As the consumer consumes more of a particular product,it will get to a point where utility starts to diminish.

2.) I)Cardinal school of thought
II) Ordinal school of thought.

CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.Utility is measurable.
The consumer is rational,there is diminishing marginal utility and total utility (TU) depends on the quantity consumed.

ORDINAL SCHOOL OF THOUGHT:
Ordinal Utility states that the satisfaction a consumer gets after consuming a good or service cannot be scaled in numbers, whereas, these things can be arranged in the order of preference

3) The demand for pricing productive factor emphasizing on labour market ;
If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This would shift the labour demand curve outwards.

Name:Onuigbo Thelma Ogechi
Reg no: 2021/244661
Email: ogechithelma14@gmail.com

(1)Briefly discuss the elementary theory of utility.

The elementary theory of utility is a fundamental concept in economics that explains how people make choices based on their preferences and how they maximize their satisfaction or well-being.
According to this theory, individuals have preferences over different bundles of goods and services, and they choose the bundle that gives them the highest level of satisfaction or utility. Utility is the measure of satisfaction or pleasure that individuals derive from consuming goods and services.
The theory of utility assumes that individuals are rational and that they aim to maximize their utility subject to their budget constraint. The budget constraint represents the limit on the amount of goods and services that an individual can consume given their income and the prices of the goods.
The theory also assumes that individuals face diminishing marginal utility, which means that as they consume more of a good or service, the additional satisfaction or utility that they derive from each additional unit of the good or service decreases. This leads to the law of demand, which states that as the price of a good or service increases, the quantity demanded decreases, and vice versa.
The theory of utility also gives rise to the concept of indifference curves, which are curves that represent all the combinations of two goods that provide the same level of satisfaction or utility to an individual. The slope of the indifference curve represents the rate at which an individual is willing to trade one good for another.
Overall, the elementary theory of utility provides a framework for understanding how individuals make choices based on their preferences and how they allocate their limited resources to maximize their satisfaction or well-being.

(2) Mention and discuss the different views of utility according to the two schools of thoughts which you have been taught.

(i)The Cardinal school of thought
It assumes that utility can be measured in numerical terms, and that these numerical values can be compared across different individuals and goods.
There are five assumptions of the cardinal approach are total utility,money income of the consumer is held constant,there is diminishing marginal utility,the consumer is rational and utility is measurable

(ii)The ordinal school of thought
The ordinal approach of utility is a theory in economics that suggests that utility, or the satisfaction or happiness that a consumer derives from consuming a good or service, can only be ranked or ordered, but not measured in absolute terms. This means that economists can compare the utility that a consumer derives from consuming one good or service to the utility they derive from consuming another good or service, but they cannot assign a specific value to the utility itself.
The ordinal approach of utility is often contrasted with the cardinal approach, which suggests that utility can be measured in absolute terms, allowing for precise comparisons of the utility derived from different goods or services. However, the cardinal approach has been largely discredited, as it is difficult to measure utility in a way that is consistent across individuals and over time.
The ordinal approach of utility is a key concept in modern microeconomic theory and is used to analyze consumer behavior and preferences, as well as to explain market demand and the behavior of firm.

(3)Explain the demand for and pricing of productive factors emphasizing on the labour market.

The demand for productive factors, including labor, is determined by the production process and the level of output a firm wants to achieve. In general, firms will demand more labor when they expect to increase their output, and less labor when they expect to decrease output.

The pricing of productive factors, including labor, is determined by the interaction of supply and demand. When the demand for labor increases, the price of labor (i.e., wages) will also increase. Conversely, when the demand for labor decreases, the price of labor will decrease. Similarly, when the supply of labor increases, the price of labor will decrease, and when the supply of labor decreases, the price of labor will increase.

In the labor market, the demand for labor is influenced by several factors, including the productivity of labor, the price of other factors of production, and the level of demand for the firm’s output. For example, if a firm’s output requires more labor-intensive production methods, the demand for labor will increase, leading to higher wages. Similarly, if the price of other factors of production, such as capital, increases, the firm may substitute labor for capital, leading to an increase in the demand for labor and wages. Additionally, if there is an increase in the level of demand for the firm’s output, there will be an increase in the demand for labor and wages.

The supply of labor is also influenced by several factors, including the level of education and training of the workforce, demographic changes, and government policies. For example, an increase in the level of education and training of the workforce can lead to an increase in the supply of skilled labor, leading to a decrease in wages for skilled labor. Similarly, demographic changes, such as an aging population, can lead to a decrease in the supply of labor, leading to an increase in wages.

In summary, the demand for and pricing of labor in the labor market are determined by the interaction of supply and demand, which is influenced by several factors, including the productivity of labor, the price of other factors of production, the level of demand for the firm’s output, the level of education and training of the workforce, demographic changes, and government policies.

1) Individual preferences inform the beliefs of utility theory. A theory in economics that tries to explain how people behave is based on the idea that people can always put their choices in order of preference. Preferences that appear to be ingrained in each individual will manifest differently. As a result, we can assert that individual preferences are inherent. By definition, any theory that proposes to capture preferences is an abstraction based on a few presumptions. Positive utility theory aims to explain the observed behavior and choices of individuals. In the field of economics, the distinction between a theory’s positive and normative aspects is crucial. There are those who contend that economic theories ought to be normative—that is, they ought to be prescriptive and ought to tell people what to do. Other people argue, frequently with success, that economic theories are intended to provide explanations for the observed behavior of market agents, which is positive in that sense. This is in contrast to a normative theory, which holds that people should act in a certain way. Instead, we can only infer preferences about individuals after observing their choices because the theory itself is positive. A utility function, a mathematical formulation that ranks the preferences of the individual in terms of the degree to which various consumption bundles provide satisfaction, can be used to analytically represent those preferences when certain restrictions are placed on them. We can therefore assume, in accordance with utility theory’s presumptions, that people acted as though they had a utility function.

2) We have the cardinal school of thought and we have the ordinal school of thought. The concept of ordinal utility states that the level of satisfaction a consumer obtains after consuming various commodities cannot be measured in numbers but can be arranged in the order of preference while the cardinal utility states that the level of satisfaction a consumer acquires after consuming any goods and services can be measurable and expressed in quantitative numbers.

3) The Demand For And The Pricing Of Production Factors Being Emphasized On The Labour Market Has To Deals The Labor at Use, The Continuous Production Of The Products ( that is it’s availability), the supply to the market, and the consumers itself. The Labour Market Has It That The law of demand states that a higher price leads to a lower quantity demanded and that a lower price leads to a higher quantity demanded. So it also comes to the conclusion that the product price and demand is inter related which bring a huge rise or fall in the Labour market And it should be noted that Price is dependent on the interaction between demand and supply components of a market.

Name:Madu Ugochi Juluet
Reg no:2021/246120
Course:Eco 101
Dept:Public administration and local government
Faculty:social sciences

1) Briefly discuss the elementary theories of utility.
Utility is interested in people’s preferences or value and with assumption about a person’s preference in numerically useful ways.It can also be said as a theory postulated in economic to explain behavior of individual based on the promises people can constantly rank order their choices depending upon their preferences.

2) Mention and discussion the different view of untility according to the two schools of though which u have been taught.
A) Ordinal school of taught
B)cardinal school of taught

A) Ordinary school of taught states that
Utility cannot be measured,satisfaction which a consumer services from the consumption of products cannot be measured numerically.The satisfaction of user goods can be ranked in order of preference but cannot be evaluated. While the

B)Cardinal school of taught states that
Cardinal utility determines the satisfaction of a commodity used by an individual and can be supported with a numerical value .It assumes that marginal utility decreases it diminishes with each extra unit of consumption known as law of diminishing marginal utility.

The measuring trend for cardinal and ordinal utility is utils and ranks respectively.Utils is the unit of utility and rank determines the preference of a product compared to the other product in the market.

3)Explain the demand for and pricing of productive factors,emphasizing on the labor market.

Discussion related to the demand and pricing are usually called decisions economic reasoning and concept provides much of the theoretical foundation for marketing practice.
Labor market is an economic function in an economy function with demand and supply of labor.In this market,the labor demand is firms demand for labour and supply.

NAME: Ezeh Tobenna Chisom
REG NO: 2021/244048
EMAIL: ezeh1tobs@gmail.com

1. Theory of utility, in economics, refers to the theories that seeks to explain an individual’s observed behavior when he/her purchases products and makes economic choices. The theory of utility cannot be full discussed without define its key focus, utility – utility can be defined as the satisfaction derived from the consumption of a good or service. In accordance to this definition, the observed behaviour in the theory of utility refers to satisfaction. The theory of utility is very important in economics, as it explains one of economic’s core principle, the demand theory.

2. Over the year many economists have taken two paths in explaining the theory of utility, those paths are common referred to as the two school of thoughts in the study of utility. They are:
a. The cardinal school of thought: This school of thought states that the level of satisfaction a consumer acquires after consuming any goods and services can be measurable and expressed in quantitative numbers, i.e. 2, 5, 28, 35, 174, called ‘utils’. Cardinal utility was propounded in the 19th century by Alfred Marshall
b. The ordinal school of thought: This school of thought states that the level of satisfaction a consumer acquires after consuming any goods and services cannot be measurable and expressed in quantitative numbers, but can be ranked in other of preference. Ordinal utility was propounded in the 20th century by John R. Hicks and Roy G. Allen.

3. Demand for labor is a concept that describes the amount of labour that an economy or firm is willing to employ at a given point in time. It is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage. A profit-maximizing entity will command additional units of labor according to the marginal decision rule: If the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to the total cost, the firm will increase profit by increasing its use of labor. It will continue to hire more and more labor up to the point that the extra revenue generated by the additional labor no longer exceeds the extra cost of the labor. This relationship is also called the marginal product of labor (MPL) in the economics community.
Price of labour is a part of wage-bill or payroll that can be specifically and consistently assigned to or associated with the manufacture of a product, a particular work order, or provision of a service. Also, we can say it is the cost of the work done by those workers who actually make the product on the production line. It can be determined by the change in total cost after a unit of labour is employed, all time remaining constant. The price of labour is commonly controlled by the government through implementation of price ceilings and floors, price ceiling being the maximum price and price floor, the minimum price.

NAME: Ezeh Tobenna Chisom
REG NO: 2021/244048
EMAIL: ezeh1tobs@gmail.com
1. Theory of utility, in economics, refers to the theories that seeks to explain an individual’s observed behavior when he/her purchases products and makes economic choices. The theory of utility cannot be full discussed without define its key focus, utility. Utility can be defined as the satisfaction derived from the consumption of a good or service. In accordance to this definition, the observation in the theory of utility refers to satisfaction. The theory of utility is very important in economics, as it explains one of its key factors, the demand theory.

2. Over the year many economists have taken two paths in explaining the theory of utility, those paths are common referred to as the two school of thoughts in the study of utility. They are:
a. The cardinal school of thought: This school of thought states that the level of satisfaction a consumer acquires after consuming any goods and services can be measurable and expressed in quantitative numbers, i.e. 2, 5, 28, 35, 174, called ‘utils’. Cardinal utility was propounded in the 19th century by Alfred Marshall
b. The ordinal school of thought: This school of thought states that the level of satisfaction a consumer acquires after consuming any goods and services cannot be measurable and expressed in quantitative numbers, but can be ranked in other of preference. Ordinal utility was propounded in the 20th century by John R. Hicks and Roy G. Allen.

3. Demand for labor is a concept that describes the amount of labour that an economy or firm is willing to employ at a given point in time. It is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage. A profit-maximizing entity will command additional units of labor according to the marginal decision rule: If the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to the total cost, the firm will increase profit by increasing its use of labor. It will continue to hire more and more labor up to the point that the extra revenue generated by the additional labor no longer exceeds the extra cost of the labor. This relationship is also called the marginal product of labor (MPL) in the economics community.
Price of labour is a part of wage-bill or payroll that can be specifically and consistently assigned to or associated with the manufacture of a product, a particular work order, or provision of a service. Also, we can say it is the cost of the work done by those workers who actually make the product on the production line. It can be determined by the change in total cost after a unit of labour is employed, all time remaining constant. The price of labour is commonly controlled by the government through implementation of price ceilings and floors, price ceiling being the maximum price and price floor, the minimum priced

UDEH ONYINYECHI JOSEPHINE
Reg number:2021/244152
Faculty: social sciences
Dept: Sociology and Anthropology
Email: udehjosephine1o1@gmail.com

Question 1
ans: Utility theory is a theory in economics that emphasizes individuals choices. This theory explains the behavior of individuals based on the idea that people make choices based on preferences. Utility theory explains how individuals decisions and behaviors can change based on their preferences. The primary focus of the utility theory is that individuals will prefer decisions that provide the most utility for their given preferences. In some cases, measuring utility from a given decision may not be possible. However, this theory assumes that individuals behave as if they make a decision by assigning an imaginary number to it

Question 2
ans: There are basically 2 school of thought in the analysis of utility they are :-
*Cardinal school of thought
*Ordinal school of thought

Cardinal school of thought:This emphasizes that utility is measurable. That is,after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity
ASSUMPTIONS Of CARDINAL APPROACH
*Utility is measurable
*The consumer is rational
* There is diminishing marginal returns utility
*Total utility (TU) depends on the quantity consumed
*Money income of the consumer is held constant

Ordinal school of thought:Explains that the satisfaction after consuming a goods or service cannot be scaled in numbers,however , these things can be arranged in the order of preference. According to the ordinal theory, utility is a psychological phenomenal like happiness, satisfaction etc. It is highly subjective in nature and varies across individuals. Therefore,it cannot be measured in quantifiable terms.
ASSUMPTIONS OF ORDINAL UTILITY
*Rationality
*Ordinal utility
*Transitivity and uniformity of choice
*Non-satiety
*Diminishing marginal returns rate of substitution

Question 3
ans: the demand for and pricing of productive factors emphasizing on the labour market:
demand for labour is the number of labours-hours an employer needs to hire at a given point in time based on different variables
* factors affecting demand in a productive labour market are:
*wages:
if the wages goes up in a country,the demand for labour will go down accordingly. Therefore,some people argue that if the minimum wages go up ;many employers will be unable to pay their employees accordingly thereby creating less demand for labour
*Marginal productivity:
The demand for labour is a derived demand meaning that it hinges on the demand for the products/services the workers are producing.
*Technology:
technology has vastly changed the way people work.Technology disruptions happen often creating both positive and negative impacts for the labour market. These disruptions can increase the demand for some people while reducing the demand for others
*Profitability of organisations
organisations will be willing to recruit more people if their business is profitable.on the other hand , if the profitability suffers, they may be unwilling to recruit workers thereby reducing the demand for labour

1) utility is the amount of satisfaction derived from the consumption of a commodity at a particular time . it is the satisfying power of a commodity which is distinct from mere usefulness.

2)* ordinal utility
* cardinal utility

Ordinal” utility refers to the concept of one good being more useful or desirable than another.
“Cardinal” utility is the idea of measuring economic value through imaginary units, known as “utils.”

3). Demand for labor is a concept that describes the amount of demand for labor that an economy or firm is willing to employ at a given point in time. This demand may not necessarily be in long-run equilibrium. It is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage
profit-maximizing entity will command additional units of labor according to the marginal decision rule: If the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to the total cost, the firm will increase profit by increasing its use of labor. It will continue to hire more and more labor up to the point that the extra revenue generated by the additional labor no longer exceeds the extra cost of the labor. This relationship is also called the marginal product of labor (MPL) in the economics community.

Other Considerations in Demand for Labor
According to the law of diminishing marginal returns, by definition, in most sectors, eventually the MPL will decrease. Based on this law: as units of one input are added (with all other inputs held constant) a point will be reached where the resulting additions to output will begin to decrease; that is marginal product will decline.

1) Briefly discuss the elementary theory of utility

Define Utility in Economics
What does utility mean in economics? Utility theory in economics pertains to the value or worth of a certain good, service, or item. It suggests that goods, services, and items can be ranked according to their usefulness. The premise was initially theorized by Swiss mathematician, Daniel Bernoulli, in the 18th century. Bernoulli founded the idea with regard to the differing values of things. With respect to theory, the utility of an item tends to be closely correlated to its price. An item such as gold, which is very useful and thus has great utility (combined with its scarcity), is very expensive. Total utility is closely tied to the bare concept of utility. Total utility points to the aggregate amount of usefulness and fruition there is to be gained from the use of a specific good, service, or other item. Furthermore, the abstract measurement of utility is another key concept of the theory. Although it’s hard to calculate the exact utility of something, economists use abstract measurements to capture the usefulness of things.

Daniel Bernoulli is famous for founding the Utility Theory in the 18th century.

Daniel Bernoulli

The four basic assumptions of utility theory are that a customer can rank any number of given options, more total utility is always better than less, a mix of goods is better than a set of one good, and customers are rational decision makers:

Ranking Options – An individual can rank any number of options based on their utility and the amount of satisfaction they’ll gain from each
More Total Utility is Better – For a good, service, or any other item, having more total utility is always better than having less as it points to more gratification found in the good, service, or item
Variety is Better – To have a diversified set of goods is better than to have a set of only one good. This is due to the increased usefulness found in differing goods compared to a single good
Rational Consumers – It is generally assumed that individuals are rational decision makers who’ll always make the best choice in light of utility
There are also different types of utility, such as: f

Form Utility – Worth of the good or service based on the combined resources it took to create the good or service
Time Utility – The utility that is found in offering a good or service to consumers at the right time
Place Utility – Refers to offering a good or service in the right place for consumers’ easy accessibility
Possession Utility – The satisfaction a consumer gains from owning a certain product/good

2) mention and discuss the different views of utility according to the two schools of thought which you have been taught.

Cardinal Utility Economics Examples
What is a cardinal utility economics example? Cardinal utility is a quantitative approach to measuring utility. It presents the utility of something as a fixed number – it’s an exact measure of utility. An individual can rank goods or services according to their cardinal utility by comparing the utility numbers derived from the goods or services. For example, a bunch of 20 bananas can be said to have a cardinal utility of 20, whereas a bunch of 10 only has a utility value of 10.

Ordinal Utility Economics Examples
What is an ordinal utility economics example? Ordinal utility is a relative measure of utility. It describes how one can determine the value of a good or service by comparing it to another. This measurement only captures which good or service is better, not how much better it is. Customers might assign value to goods or services according to ordinal utility. For example, a man asks his friend which one of two local barbershops is better. His friend tells him barber B is better because his skills are more refined. This is a relative measure as one can’t quantitatively measure how much better the one barber cuts hair compared to the other.

3) Explain the demand for and pricing of productive factors emphasizing on the labour market.

What is the demand for labour?
The concept of labour market can be viewed as a ‘factor market.’ Factor markets provide a way for firms and employers to find the employees they need.

The demand for labour shows how many workers the firms are willing and able to hire at a given time and wage rate.

Therefore, demand for labour is a concept that illustrates the amount of labour a firm is willing to employ at a particular wage rate. However, the determination of equilibrium in the labour market will also depend on the supply of labour.

Equilibrium in the labour market depends on the wage rate firms are willing to pay and the amount of labour willing to provide the necessary work.

Demand for labour curve
As we said, the demand for labour shows how many workers an employer is willing and able to hire at a given wage rate at any given time.

The labour demand curve shows an inverse relationship between the employment level and the wage rate as you can see in Figure 1.

demand for labor demand curve studysmarter
Fig. 1 – Labor demand curve

Figure 1 illustrates that if the wage rate decreased from W1 to W2 we would see an increase in employment level from E1 to E2. This is because it would cost less for a firm to hire more workers to produce its output. Thus, the firm would hire more, thereby increasing employment.

Conversely, if the wage rate increased from W1 to W3, employment levels would fall from E1 to E3. This is because it would cost more for a firm to hire new workers to produce its output. Thus, the firm would hire less, thereby decreasing employment.

When wages are lower, labour becomes relatively cheaper than capital. We can say that when the wage rate starts decreasing, a substitution effect might occur (from capital to more labour) that would lead to more labour being employed.

Demand for labour as a derived demand
We can illustrate derived demand with a couple of examples that include the factors of production.

Remember: the factors of production are the resources used to produce goods and services. They include land, labour, capital, and technology.

The demand for reinforcement bars is high due to their frequent use in the construction industry. Reinforcement bars are often made of steel; thus, high demand for these would also correspond to high demand for steel. In this case, steel demand is derived from the demand for the reinforcement bars.

Assume (without considering the effects of COVID-19) that there is an increased demand for air travel. This will inevitably lead to an increase in demand for airline pilots since airlines will need more of them to supply the growing demand for air travel. The airline pilots’ demand in this scenario will be derived from the demand for air travel.

Derived demand is the demand for a factor of production that results from the demand for another intermediate good. In the case of labour demand, it is derived from the demand for a product or a service that labour produces.

A firm will demand further labour only if an increase in the labour force will guarantee to bring in more profits. Essentially, if the demand for a firm’s product increases, the firm will demand more labour to sell the additional units of goods or services. The assumption here is that the markets will demand the goods produced by labour, which in turn will be employed by firms.

Factors affecting the demand for labour
Many factors that can affect the demand for labour.

Labour productivity
If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This would shift the labour demand curve outwards.

Changes in technology
Changes in technology can cause the demand for labour to increase and decrease depending on the situation.

If technological changes make labour more productive relative to the other factors of production (such as capital), firms would demand an increased amount of workers and substitute the other factors of production with new labour.

For example, the production of computer chips will require a certain amount of skilled software and hardware engineers. Thus, the demand for such workers would increase. This would shift the labour demand curve outwards.

However, with the production and subsequent competition from other firms, we could assume that chip development could become automated. The subsequent result would be a replacement of labour with machines. This would shift the labour demand curve inwards.

Changes in the number of firms
Changes in the number of firms operating in the industry can have an immense effect on the overall labour market. This is because demand for a certain factor can be determined by the number of firms currently utilising that factor.

For example, if the number of restaurants increases in a certain area, the demand for new waiters, waitresses, cooks, and other forms of gastronomy workers will increase. An increase in the number of firms would result in an outward shift in the labour demand curve.

Changes in demand for a product that labour produces
If there is an increase in demand for new vehicles, we would likely see an increase in demand for raw materials used in vehicle production. This would lead to an increase in demand for workers, as firms would need people to manufacture the vehicles. This would shift the labour demand curve outwards.

Profitability of firms
If a firm’s profitability increases, it will be able to hire more workers. This will lead to an increase in the demand for labour. Conversely, a firm that is making no profit and is consistently registering losses will need to layoff workers as it will not be able to pay them anymore. This would subsequently reduce the demand for labour and shift the demand curve of labour inwards.

The marginal productivity theory of demand for labour
The marginal productivity theory of demand for labour states that firms or employers will hire workers of a particular type until the contribution made by the marginal worker is equal to the cost incurred by having hired this new worker.

We have to assume that this theory is applied to wages in this context. The wage rate is determined through the forces of demand and supply in the labour market. These market forces ensure that the wage rate is equal to that of the marginal product of labour.

However, the theory of diminishing marginal returns assumes that the marginal worker provides less contribution to the work than that of their predecessor. The theory assumes that the workers are relatively the same, meaning they are interchangeable. Based on this assumption, many workers that are hired receive the same wage rate. However, if the firm were to hire workers based on the marginal productivity theory, the firm would then maximise its profits. This can only happen if the hired marginal workers contribute more in value than the costs incurred by the firm.

The determinants of the elasticity of demand for labour
The elasticity of demand for labour measures labour demand’s responsiveness to a change in the wage rate.

There are four main determinants of the elasticity of demand for labour:

The availability of substitutes.
The elasticity of demand for the products.
The proportion of labour cost.
The elasticity of supply of substitutes inputs.

Eco 101 quiz
1. Briefly discuss the elementary theory of utility.
It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank, order their choice depending upon their preference.
2. Mention and discuss the different views of utility according to the two school of thoughts which you have been thought.
a) Cardinal utility.
b) Ordinal utility.
Cardinal utility believes in measuring the satisfaction level in utils.
Ordinal utility believes that the satisfaction level cannot be evaluated, however, it can be leveled .
3. Explain the demand for and pricing of productive factors emphasizing on the labour market.
Demand for labour discribes the amount and market wage rate workers and employers settle upon at any given moment.
The theory of factor pricing deals with the determination of the share prices of four factors do production, namely, land, labour, capital and enterprise.

Name: Acholonu Chidubem Wisdom
Reg no: 2021/243697

1) Utility theory is based on the fact that satisfaction which consumers derive from consumption of goods and services can be measured quantitatively

2) Different views of utility are cardinal utility and ordinal utility. The cardinal utility believes in measuring the satisfaction level in units and the ordinal utility believes that the satisfaction level cannot be evaluated; however it can be leveled.

3) The demand for labour is an economic principle derived from the demand for a firm’s output. That is, if demand for a firm’s output increases, the firm will demand more labor, thus hiring more staff. And if demand for the firm’s output of goods and services decreases, in turn, it will require less labor and it’s demand for labor will fall, and less staff will be retained.
Factor pricing is associated with the prices that an entrepreneur pays to avail the services rendered by the factors of production.

Name- Abaligwe favour Iheoma
Course- Eco 101 Assignment
Department- Biochemistry
Registration Number- 2020/241486
Email address- favourabaligwe@gmail.com

Eco 101 Online Quiz and Discussion (Utility and others)—-6/3/2023
1) Briefly discuss the elementary theory of utility.
2) Mention and discuss the different views of utility according to the two schools of thoughts which you have been taught.
3) Explain the demand for and pricing of productive factors emphasizing on the labour market.

Answer No 1
The elementary theory of utility is an economic theory that explains how individuals make decisions about what goods and services to consume, based on their preferences and the constraints they face. Individuals seek to maximize their satisfaction or happiness, known as utility, by making rational decisions about what to consume given their income and the prices of goods and services. The theory also includes the law of diminishing marginal utility, which explains that as an individual consumes more of a good or service, the additional satisfaction or happiness they derive from each additional unit decreases

Answer No 2
a. Cardinal Utility
b. Ordinal Utility
Cardinal Utility
The notion of Cardinal utility was formulated by Neo-classical economists, who hold that utility is measurable and can be expressed quantitatively or cardinally, i.e. 1, 2, 3, and so on. The traditional economists developed the theory of consumption based on cardinal measurement of utility, for which they coined the term ‘Util ‘ expands to Units of utility. It is assumed that one util is equal to one unit of money, and there is the constant utility of money.
Further, it has been realised with the passage of time that the cardinal measurement of utility is not possible, thus less realistic. There are many difficulties in measuring utility numerically, as the utility derived by the consumer from a good or service depends on a number of factors such as mood, interest, taste, preferences and much more.
Ordinal Utility
Ordinal Utility is propounded by the modern economists, J.R. Hicks, and R.G.D. Allen, which states that it is not possible for consumers to express the satisfaction derived from a commodity in absolute or numerical terms. Modern Economists hold that utility being a psychological phenomenon, cannot be measured quantitatively, theoretically and conceptually. However, a person can introspectively express whether a good or service provides more, less or equal satisfaction when compared to one another.
In this way, the measurement of utility is ordinal, i.e. qualitative, based on the ranking of preferences for commodities. For example: Suppose a person prefers tea to coffee and coffee to milk. Hence, he or she can tell subjectively, his/her preferences, i.e. tea > coffee > milk.

Answer No 3
The demand for productive factors refers to the demand for the resources that are used in the production of goods and services, such as labor, capital, and land. The pricing of these factors is determined by the supply and demand in their respective markets.
In the labor market, the demand for labor is determined by the marginal productivity of labor, which is the additional output that is produced by hiring an additional unit of labor. Employers will hire workers up to the point where the marginal productivity of labor is equal to the wage rate. This means that if the wage rate increases, the demand for labor will decrease, as it becomes more expensive for employers to hire workers.
The supply of labor, on the other hand, is determined by the number of people who are willing and able to work at a given wage rate. This is influenced by factors such as education and training, demographics, and the availability of alternative sources of income. When the supply of labor increases, the wage rate tends to decrease, as there is more competition among workers for available jobs.
The equilibrium wage rate in the labor market is the wage rate at which the quantity of labor demanded equals the quantity of labor supplied. This is the point where the marginal productivity of labor is equal to the wage rate, and the market is in a state of balance.
In summary, the demand for and pricing of productive factors in the labor market are determined by the marginal productivity of labor, the supply of labor, and the equilibrium wage rate. This market operates like any other market in that it is subject to the laws of supply and demand.

1. The economic utility of goods and services is important to understand, because it directly influences demand and therefore the price of that goods or services

2. We have the cardinal school of thought
We agave the ordinal school of thought

The cardinal school of thought : This approach comprises that utility is measurable.that is after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity

The ordinal school of thought : The approach to consumer’s utility states that the utility satisfaction cannot be measured in exact numbers but can only be ranked or put in order.

3. If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase

BRIEFLY DISCUSS THE ELEMENTARY THEORY OF UTILITY

Definition: Utility theory is an economic hypothesis that postulates the fact that consumers make purchase decisions based in the degree of utility or satisfaction they obtain from a given item. This means that the higher the utility level the higher the item will be prioritized in the consumer’s budget.

What Does Utility Theory Mean?
This theory states that consumers rank products in their minds whenever they are facing a purchase decision. These ranking function drives their budget allocation, which means that resources are poured into the purchases that will bring the highest degree of satisfaction. It is assumed that individual budgets are limited and therefore there is a limited amount of goods or services that can be purchased, taking this into account, an individual will weigh which of the options currently available within the open market is the best suit to fulfill his current set of needs or desires.

In these cases, preferences also play a key role and these can be defined as a set of predispositions that each individual possesses towards certain brands or products by elements such as colors, shapes, tastes or smells. Finally, there are four essential types of utility and these are form utility, time utility, place utility and possession utility.

Example
Harold is a 45 year old computer engineer that was recently hired by a company called Tech Mogul Co. which is a firm that provide security solutions for information systems, mostly to the banking industry. Harold is considered to be a very sophisticated person who enjoys luxurious accessories and gadgets. His salary is big enough to allow him to purchase such items and he is normally up to date with new technological devices. Recently, Harold was presented with the new version of the smartphone he currently owns. Tho he has a phone already the satisfaction he gets from getting this new version is more.

MENTION AND DISCUSS THE DIFFERENT VIEWS OF UTILITY ACCORDING TO THE TWO SCHOOLS OF THOUGHT WHICH YOU HAVE BEEN TAUGHT.

2. There are basically two school of thought in the analysis of utility and they are:
*Cardinal school of thought
*Ordinal school of thought

CARDINAL APPROACH:
This approach emphasizes that utility is measurable. That is, after consuming a given commodity the consumer can simply evaluate his satisfaction through the use of figures which ranges from zero to infinity.

ASSUMPTIONS OF CARDINAL APPROACH
I. utility is measurable
ii. The consumer is rational
iii. There is diminished marginal utility
iv. Total utility (TU) depends on the quantity consumed.
v. money income of the consumer is held constant

ORDINAL UTILITY APPROACH
It is based on the fact that the utility of a commodity cannot be measured in absolute quantity, but however it will be possible for a consumer to tell subjectively whenever the commodity derives more or less or equal satisfaction when compared to another.

ASSUMPTION OF ORDINAL UTILITY APPROACH
1. RATIONALITY: It is assumed that the consumer is rational which aims at maximizing his level of satisfaction for given income and prices of goods and services, which he wishes to consume.
2. ordinal utility: The difference curve assume that the utility can only be expressed ordinally. This means the consumer can only tell his order of preference for a given goods and services.
3. Transitivity and consistency of choice : The consumer’s choice is expected to be either transitive and consistent.
4. No satiety: It is assumed that the consumer has not reached the satisfaction point of any commodity and hence, he prefers larger quantities of all commodities.
5. Diminishing marginal rate of substitution (MRS): The marginal rate substitution refers to the rate at which the consumer is ready to substitute one commodity (A) for another commodity (B) in such way that his total satisfaction remains unchanged. The MRS is denoted as DB/DA goes on diminishing A for B.

EXPLAIN THE DEMAND FOR AND PRICING OF PRODUCTIVE FACTORS EMPHASIZING ON THE LABOUR MARKET

3. Demand for and pricing of productive factors
The marginal productivity theory came under severe criticism of modern economist on the ground, that it ignores that supply sides of a factor of production besides many other weak points.
According to the theory just as the price of a commodity which is determined by the forces of demand and supply, similarly, the prices of a factor of production is also determined by the demand of that factor and it’s supply.
DEMAND FOR A FACTOR OF PRODUCTION
The demand for a factor is not a direct demand but it is an indirect demand or derived demand. The demand for labour, for example is not demand for labour itself . it is infact, demand for goods and services which labour produces. Thus when demand for goods increases, the demand for the factors which produces those goods would also rise.

SUPPLY OF A FACTOR OF PRODUCTION
The supply of a factor of production depends upon the number of factors. Let’s take labour for example the supply of labour depends upon the size and composition of population, it’s geographical and occupation of population etc . But one thing that’s is generally true is that more labour would be offered in the market when wages are higher.

CRITICISM ON DEMAND AND SUPPLY THEORY

The theory is criticized on the basis of some of it’s weak assumption which is given as :
1. The aspect of increasing return of the theory distribution or factors pricing is completely ignored.
2. As the factors of production are not close or complete substitutes of each other, therefore they cannot be substituted for another.
3. Homogeneity is all units of a factor of production is not possible.
4. Prevalence of perfect competition in both factors of production market is not correct because in the real world it does not prevail

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Theory of utility: utility theory is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measured quantitatively. Utility theory also bases it belief on individuals’ preferences. It is a theory that explain human behavior based on the premise people can consistently rank order their choices depending on their preference. Utility theory pertains to the value or worth of a certain good, service, or item. It suggests that goods, services, or items can be ranked according to their usefulness. The utility of an item tends to be closely correlated to it’s price. An item like gold, which is very useful and this has great utility (combined with it’s scarcity), is very expensive.

The two school of thought:
1.Cardinal utility: cardinal utility is where the satisfaction derived from consuming a product can be expressed numerically. It is the idea that satisfaction can be directly observable, measurable, and be given a value or it can be expressed in quantitative numbers. It is used by customers to know how many things used in numbers or quantity to get desired degree of satisfaction after consumption of goods and services. Cardinal utility measurements are done in utils unit.

2.Ordinal utility: ordinal utility expresses the utility of a commodity in terms of ‘less than’ or ‘more than’. It is used in economics as a function to determine preference of satisfaction level derived by customer after consumption of goods and services. The preference of satisfaction derived by customers are always represented without statistical number. Customers used percentage and other characters of goods and services to determine preference of one goods over another product, it can’t be evaluated numerically. It used ranking of goods and services according to customers preference of needs and demands.

3. The demand for and the pricing of productive factors emphasizing on the labour market:
When producing goods and services, businesses require labour and capital as inputs to their production process. The demand for labour is derived from the firm’s output. That is, if demand for a firm’s output increases, the firm will demand more labour, thus hiring more staff. Factor pricing is associated with the prices that an entrepreneur, firm’s or businesses pays to avail services rendered by the factor of production ( in this case, it’s labour). Labour market factors drive the supply and demand for labour. Those seeking employment will supply their labour in exchange for wages. Businesses or firms demanding labour from workers will pay for their time and skills after pricing the wages and concluded on an agreed wages rate.

1. Utility is referred to as the satisfaction, pleasure or fulfillment a consumer derives from consuming a particular good. The concept of utility is used to determine consumer’s tastes and preferences which is an important step in determining how a consumer maximises satisfaction in spending income.
The utility of a consumer cannot be measured but it can be determined indirectly with consumer behaviour theories which assumes that consumers will strive to maximise their utility with the available resources they have.
However when a consumer derives satisfaction or pleasure from consuming a good or service, it can be said that the goods or services consumed possesses utility which is relative to the consumer depending on time, place, form and possession.
2. The cardinal school of thought
The ordinal school of thought
The cardinal school of thought
This school of thought emphasizes that utility is measurable. This means that the quantity of goods or services that satisfies the need of a consumer can be determined through figures ranging from zero to infinity. The cardinal school of thought assumes that;
a) Total utility depends on the quantity of goods and services.
b) Money income of the consumer is held constant
C) There is diminishing marginal utility
d) The consumer is rational
e) Utility is measurable
The Ordinal school of thought
The ordinal approach of utility requires that consumers make a scale of preference by choosing between the various commodities that gives one the same level of satisfaction. This approach assumes that utility can be ranked at various levels of consumption. This approach makes use of an indifference curve that indicates the levels of satisfaction attained by a consumer from the consumption of two commodities.
3. Labour market like other good market in the economy are governed by the forces of demand and supply. The supply and demand for labour determine the wage or price paid for labour services. Like all other prices, the price of labour (wage) depends on demand and supply. The demand curve reflects the value of marginal product of labour. Therefore, in equilibrium, workers receive the value of their marginal contribution to the production of goods and services.

1 Define Utility in Economics
What does utility mean in economics? Utility theory in economics pertains to the value or worth of a certain good, service, or item. It suggests that goods, services, and items can be ranked according to their usefulness. The premise was initially theorized by Swiss mathematician, Daniel Bernoulli, in the 18th century. Bernoulli founded the idea with regard to the differing values of things. With respect to theory, the utility of an item tends to be closely correlated to its price. An item such as gold, which is very useful and thus has great utility (combined with its scarcity), is very expensive. Total utility is closely tied to the bare concept of utility. Total utility points to the aggregate amount of usefulness and fruition there is to be gained from the use of a specific good, service, or other item. Furthermore, the abstract measurement of utility is another key concept of the theory. Although it’s hard to calculate the exact utility of something, economists use abstract measurements to capture the usefulness of things.

The four basic assumptions of utility theory are that a customer can rank any number of given options, more total utility is always better than less, a mix of goods is better than a set of one good, and customers are rational decision makers:

Ranking Options – An individual can rank any number of options based on their utility and the amount of satisfaction they’ll gain from each
More Total Utility is Better – For a good, service, or any other item, having more total utility is always better than having less as it points to more gratification found in the good, service, or item
Variety is Better – To have a diversified set of goods is better than to have a set of only one good. This is due to the increased usefulness found in differing goods compared to a single good
Rational Consumers – It is generally assumed that individuals are rational decision makers who’ll always make the best choice in light of utility
There are also different types of utility, such as: f

Form Utility – Worth of the good or service based on the combined resources it took to create the good or service
Time Utility – The utility that is found in offering a good or service to consumers at the right time
Place Utility – Refers to offering a good or service in the right place for consumers’ easy accessibility
Possession Utility – The satisfaction a consumer gains from owning a certain product/good

Cardinal Utility Economics Examples
What is a cardinal utility economics example? Cardinal utility is a quantitative approach to measuring utility. It presents the utility of something as a fixed number – it’s an exact measure of utility. An individual can rank goods or services according to their cardinal utility by comparing the utility numbers derived from the goods or services. For example, a bunch of 20 bananas can be said to have a cardinal utility of 20, whereas a bunch of 10 only has a utility value of 10.

Ordinal Utility Economics Examples
What is an ordinal utility economics example? Ordinal utility is a relative measure of utility. It describes how one can determine the value of a good or service by comparing it to another. This measurement only captures which good or service is better, not how much better it is. Customers might assign value to goods or services according to ordinal utility. For example, a man asks his friend which one of two local barbershops is better. His friend tells him barber B is better because his skills are more refined. This is a relative measure as one can’t quantitatively measure how much better the one barber cuts hair compared to the other.

Utility in Economics: Supply and Demand
Utility plays a big role in economics with respect to supply and demand. The law of diminishing marginal utility refers to how the utility gained from a certain good or service decreases as consumption increases. The more sodas you drink the less satisfaction you gain from drinking another soda.

The more an individual consumes, the less the need.

2 CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.

ASSUMPTIONS OF CARDINAL APPROACH

i. Utility is measurable
ii. The consumer is rational

iii. There is diminishing marginal utility

iv. Total utility (TU) depends on the quantity consumed.

v. Money income of the consumer is held constant

CONCEPT OF TOTAL, AVERAGE AND MARGINAL UTILITY

TOTAL UTILITY: This is the total amount of satisfaction a consumer derives from the consumption of a particular commodity at a point in time. Consumers’ utility increases as the quantity consumed increases but not at equal rate because consumer has a saturation point in the consumption of particular commodity at a given time.
AVERAGE UTILITY: This derived by dividing total utility by

the units of the commodity consumed. That is, it is the satisfaction which a consumer derives per unit of a commodity consumed. AU = TU/Q

MARGINAL UTILITY: This means the additional satisfaction a consumer derives from the consumption of additional unit of a particular commodity. It is then the change in the total utility as a result of the consumption of additional unit of a commodity. MU = ∆TU/∆Q

THE LAW OF DIMINISHING MARGINAL UTILITY

The law of diminishing marginal utility states that, other things being equal, the marginal utility of a commodity to an individual decreases with extra unit of that commodity he consumes. In other words, the law states that if a consumer goes on consuming successive equal increments in the quantity of a commodity, then the increase in total utility resulting will become smaller and smaller, that is, satisfaction per extra unit will start falling. For instance, a beer drinker may derive maximum satisfaction in the first three bottles, after which decrease in satisfaction may set in as more and more bottles of beer are consumed until he may be unable to consume anymore

UTILITY MAXIMIZATION
Utility maximization is also known as equilibrium of the consumer. A point where a consumer derives maximum satisfaction when his marginal utility equates the price of the commodity consumed. That is, the additional utility derived from the consumption of additional commodity is equal to price of the commodity.

In the case of one commodity, a consumer will maximize his satisfaction in the consumption of a particular commodity when the MU of that commodity equals the price of that commodity, eg MUx = Px

In the case of two or more commodities, a consumer is said to be in equilibrium or maximizes his utility when the ratio of MU of the last unit of the commodities consumed should be equal to the ratio of the price. Alternatively, a consumer’s utility is maximized when the MU per amount spent on a product is equal to the MU per amount spent on any other product, as stated below:

Mux/Px = Muy/Py = MUz/Pz

where MUx = MU of commodity X

Px = Price of commodity X

MUy = MU of commodity Y

Py = Price of commodity Y

MUz = MU of commodity Z

Pz = Price of commodity Z

3 What is Demand for Labor
When producing goods and services, businesses require labor and capital as inputs to their production process. The demand for labor is an economics principle derived from the demand for a firm’s output. That is, if demand for a firm’s output increases, the firm will demand more labor, thus hiring more staff. And if demand for the firm’s output of goods and services decreases, in turn, it will require less labor and its demand for labor will fall, and less staff will be retained.
Labor market factors drive the supply and demand for labor. Those seeking employment will supply their labor in exchange for wages. Businesses demanding labor from workers will pay for their time and skills.

BREAKING DOWN Demand for Labor
Demand for labor is a concept that describes the amount of demand for labor that an economy or firm is willing to employ at a given point in time. This demand may not necessarily be in long-run equilibrium. It is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage.
A profit-maximizing entity will command additional units of labor according to the marginal decision rule: If the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to the total cost, the firm will increase profit by increasing its use of labor. It will continue to hire more and more labor up to the point that the extra revenue generated by the additional labor no longer exceeds the extra cost of the labor. This relationship is also called the marginal product of labor (MPL) in the economics community.

Common Reasons for a Shift in Labor Demand

1 Changes in the marginal productivity of labor, such as technological advances brought on by computers
2 Changes in the prices of other factors of production, including shifts in the relative prices of labor and capital stock
3 Changes in the price of an entity’s output, usually from an entity charging more for their product or service

(1). utility is simply the satisfaction one derives from consuming a product to satisfy human wants.

(2). Cardinal school of thought: in the Cardinal school of thought utility can be measured using Numbers.
Ordinal school of thought: utility can only be ranked and cannot be measured.

(3). Labour market factors derive the supply and demand for labor.Those seeking employment for wages , business es demanding labor from workers will pay for their time and skills.

Name: Asiegbunam destiny ebubechukwu
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1: The Concept of Utility Theory Utility theory is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measure quantitative.

2: However, cardinal utility and ordinal utility are the two predominant theories of utility. The cardinal utility believes in measuring the satisfaction level in utils and the ordinal utility believes that the satisfaction level cannot be evaluated; however, it can be levelled.

3: According to the law of diminishing marginal returns, by definition, in most sectors, eventually the MPL will decrease. Based on this law: as units of one input are added (with all other inputs held constant) a point will be reached where the resulting additions to output will begin to decrease; that is marginal product will decline.

Another consideration is the marginal revenue product of labor (MRPL), which is the change in revenue that results from employing an additional unit of labor, holding all other inputs constant. This can be used to determine the optimal number of workers to employ at a given market wage rate. According to economic theory, profit-maximizing firms will hire workers up to the point where the marginal revenue product is equal to the wage rate because it is not efficient for a firm to pay its workers more than it will earn in revenues from their labor.

Common Reasons for a Shift in Labor Demand

Changes in the marginal productivity of labor, such as technological advances brought on by computersChanges in the prices of other factors of production, including shifts in the relative prices of labor and capital stockChanges in the price of an entity’s output, usually from an entity charging more for their product or service

Name: Chike-ijei Chiwendu Victoria
Course: Economics
Reg no:2021/243693
Email: chiwenduchikeijei@gmail.com
(1) Utility is the satisfaction a consumer derives from the consumption of a good or service.Goods are desired because of their ability to satisfy human wants.The concept of utility is used to express a consumer’s taste and preferences.The analysis of consumer tastes and preferences is a crucial step in determining how a consumer maximizes satisfaction in spending income
(2)i the cardinal school of thought
ii the ordinal school of thought
*The cardinal school of thought states that utility can be measured using numbers ranging from 0 to infinity.it means u can assign certain figures as the utility u derive when consuming a particular product.it can be measured in utils.
*The ordinal school of thought states that the level of satisfaction a consumer obtains after consuming various commodities cannot be measured in numbers but can be ranked/arranged in the order of preference
(3)A firm will demand further labour only if an increase in the labour force will guarantee to bring in more profits.Essentially,if the demand for a firm’s product increases,the firm will demand more labour to sell the additional units of goods and services.
Prices play a central role in the efficiency story.producers and consumers rely on prices as signals of the cost of making substitution decisions at the margin.

Name: Okafor Chike Charles
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1. Theory of Utility: Utility may be defined as the ability of a commodity or service to satisfy consumers wants. Therefore when a consumer derives satisfaction from the consumption of any commodity or service, it can be said that commodity or service possesses utility. In other words, any commodity or service that possesses utility is useful to the consumer that used it. As a result of the fact that usefulness is a relative term, therefore, what may be useful to one person may not be to another. Utility therefore, is relative to a consumer depending on the time, place, form, nd possession etc. A commodity that can satisfy a consumer’s want at a particular points in time and place may not satisfy another’s want.Utility then depends on the form of the commodity, individual’s time and place.

2
a. Cardinal school of thoughts: The approach emphasizes that utility is measurable. That is after consuming a given quantity of a commodity the consumer can aim or calculate his satisfaction through the use of figures which range from 0 to infinity. Some economists who belong to this school of thought argue that utility can be measured subjectively in units called “Utils”. The assumptions of the cardinal approach are;
I. Utility is measurable
ii. The consumer is rational.
iii. There is diminishing marginal utility.
iv. Total utility (TU) depends on the quantity consumed.
v. Money income of the consumer is held constant.

b. Ordinal school of thoughts: Economist who belong to this school argue that it is not possible to measure utility (satisfaction). They opine that although utility cannot be precisely measured, it is possible for a consumer to make a choice between various bundles of commodities by ranking them according to the level of satisfaction expected from each bundle without specifying exact units of utility. The ordinal approach is based on the following assumptions:
I. Total utility is determined by the quantities of commodities consumed.
ii. Rationality of the consumer. He is rational because he considers the implications of his economics choices.
iii. Utility order. The consumer can rank is preferences based on expected level of satisfaction.
iv. Preferences of consumers can be ranked in terms of indifference curves which cannot the marginal rate of substitution of commodities.
v. Consistency and transitivity of choice. The consumer is consistent in his choice and preference of one commodity over another.

3. Explain the demand for and pricing of productive factors emphasizing on the labour market.
Ans: Labour market like other goods market in the economy are governed by the forces of demand and supply. The supply and demand for labour determine the wage or price paid for labour services. Like all prices, the price of labour (the wage) depends on supply and demand. The demand curve reflects the value of marginal product of labour. Therefore in equilibrium, workers receive the value of their marginal contribution to the production of goods and services.

Name: Joseph Emmanuel Nnamdi
Reg no: 2021/246117
email: emmanueljos1929@gmail.com.

1) Briefly discuss the elementary theory of utility.
2) The term ‘utility’ refers to the amount of satisfaction derived from the consumption of a community at a particular time. The utility of a tin of milk is the amount of satisfaction derived from consuming it.Any commodity that has the power to satisfy human wants is said to possess utility.
3) A number of things should be noted about utility.
(I).utility is not the same as usefulness. something may be useful but it may not possess utility at a particular time for an individual.For example. water is essential to man but it possesses no utility as far as a drowning man is concerned.it does not satisfy his want.
(ii). Utility has no ethical significance.
something may be bad but may still possess utility for an individual, while something which is good may not possess utility from individual.
2) Mention and discuss the different views of utility according to the two schools of thoughts which you have been taught.
a).The cardinal school of thought.
The cardinal utility school of thought argues that the utility of a community can be measured. Some economists belong to this school of thought argue that utility can be measured subjectively in unity called ‘utils’. the cardinal utility concept is based on the following assumption.
1. Concept of rationality. The consumer is rational and therefore it is to maximize utility from is expenditures.
2. Diminishing marginal utility. utility of a commodity decreases, with increased consumptionn of that commodity.
b.Ordinal utility
economist who belongs to this school argue that it is not possible to measure utility. They opin that although utility cannot be precisely measured.It is possible for a consumer to make a choice between various bundles of commodities by ranking them according to the level of satisfaction expected from each boundle without specifying exact units of utility.

3) Explain the demand for and pricing of productive factors emphasizing on the labour market.
Labour Market;
Labour market like other growth markets in the economy are governed by the force of demand and supply. The supply and demand for Labour and determine the average or price for the labour services.
Like all price, the price of labor depend on supply and demand. The demand curve reflects the value of marginal product of labour. Therefore in equilibrium, workers receive the value of their marginal contribution to the production of goods and services.

Name: umehonyefosim mercy chinelo
Matric number:2021/244215
Department: combine social science (economics and psychology)
Question one
Elementary theory of utility
Concept of utility
Utility refers to the ability of goods and services to satisfy unlimited human wants.it can also be viewed as satisfaction pleasure or fulfillment an individual derives from the consumption of goods and services. Goods are desired because of their ability to satisfy human wants.The concept of utility is used to express consumer’s taste and preference.the analysis of consumer taste and preference is a crucial step in determining how a consumer maximize satisfaction in spending income.
The utility of a consumer is relatively hard to measure.However,it can be determined indirectly with consumer behavior theories, which assume that consumers will strive to maximize thier utility with the resources available to them.
Thus, when a consumer derives satisfaction from consuming goods or services, it can be said that the goods or services consumed or utility possesses utility, which is relative to the consumer depending on the types of utility which are:
TIME utility: this is the satisfaction derived by a consumer from goods and services at a particular time.
FORM utility: the transformation of goods from one form to another for the goods to confer satisfaction when consumed
PLACE utilitythis can be obtained through the process of making goods or services more easily available to potential consumers.This implies that the easily available to potential consumers.
POSSESSION utility: this refer to the satisfaction derived from ownership of goods and services.

Question 2
The Cardinal school of thought: this school of thought emphasize that utility is measurable.this means that the quality of goods or services that satisfied the need of a consumer can be evaluated through the use of figures ranging from zero to infinity.
Assumption of cardinal approach
1)Total utility (TU) depends on the quantity of goods or services utilize
2)Money income of the consumer is held constant
3)There is diminishing marginal utility (MU)
4)The consumer is rational
5)Utility is measurable
Note: there assumptions are derived from the concept of total utility, average utility and marginal utility.
Ordinal approach
The ordinal approach of utility requires that consumers make a scale of preference by choosing between the various commodities that gives one the same level of satisfaction.
This approach assumes that utility can be ranked at various levels of consumption.This approach makes use of an indifference curve( a curve that indicates the level of satisfaction attained by a consumer by a consumer from the consumption of two commodities).A combination of indifference curve is known as an indifference map.

Question three
The demand for a factor is not a direct demand but an indirect or derived demand. The demand for labour for example,is not demand for labour himself but infact, demand for goods and services which the labour produces. Thus, when demand for goods increases, the demand for the factors which produce those goods would also rise. If demand for goods is elastic, the demand for factors would also be elastic. Similarly, when demand for goods is inelastic,the factor which produces will also be inelastic.
When more of a factor is employed,it’s marginal productivity is likely to fall and hence it’s demand and price of a factor also depends upon the market price of the goods for the production of which the factor is used. If the goods are being sold at high prices, the demand for factors would also be higher.

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(1)….
The elementary theory of utility is a theory of consumer behavior that explains how individuals make choices based on their preferences and constraints. It is based on the idea that consumers aim to maximize their satisfaction or utility, subject to their budget constraints.
According to this theory, consumers have preferences for different goods and services, and they allocate their limited resources (income) among different options in order to maximize their utility. The satisfaction or utility that consumers derive from consuming a particular good or service depends on their subjective preferences, and it is typically measured in terms of units of utility or utils.
Consumers face budget constraints, which limit the amount of goods and services they can purchase. This constraint is represented by the budget line, which shows all the combinations of goods that can be purchased given the consumer’s income and the prices of goods.
Consumers maximize their utility by choosing the combination of goods and services that lies on the highest indifference curve that is still within their budget constraint. Indifference curves represent the different levels of utility that a consumer can obtain from different combinations of goods and services, assuming that the consumer is indifferent between any two points on the same curve.
The slope of the indifference curve is the marginal rate of substitution (MRS), which measures the rate at which a consumer is willing to trade one good for another while maintaining the same level of utility. The MRS is typically diminishing, meaning that consumers are willing to trade less of one good for another as they consume more of it.
Overall, the elementary theory of utility provides a framework for understanding how consumers make choices based on their preferences and constraints, and how these choices can be represented mathematically using indifference curves and the budget constraint.

(2)….
There are two main schools of thought when it comes to the concept of utility: classical economics and neoclassical economics. Here are the different views of utility according to these two schools of thought:
1. Classical Economics:
According to classical economics, utility is the satisfaction that an individual derives from consuming a good or service. This satisfaction is subjective and varies from person to person. However, classical economists believe that the concept of utility cannot be measured or quantified since it is a psychological construct.
Classical economists also believe that utility is not the primary determinant of economic behavior. Instead, they argue that individuals make decisions based on the cost and availability of goods and services. This means that individuals will only consume a good or service if its cost is lower than its perceived benefit or utility.
2. Neoclassical Economics:
Neoclassical economists, on the other hand, view utility as a measurable and quantifiable concept. They argue that utility can be measured in units called utils, which represent the satisfaction an individual derives from consuming a good or service.
Neoclassical economists believe that individuals are rational and make decisions based on maximizing their utility. This means that individuals will consume a good or service as long as its marginal utility (the additional satisfaction gained from consuming one more unit) is greater than its marginal cost (the additional cost of consuming one more unit).
Overall, classical economists see utility as a subjective and unmeasurable concept that is not the primary determinant of economic behavior. Neoclassical economists, on the other hand, view utility as a measurable and quantifiable concept that is the primary determinant of economic behavior.

(3)….
The demand for productive factors, such as labor, refers to the amount of these factors that firms are willing to hire or purchase at a given price. The pricing of these factors refers to the wage rate or payment that is required to hire or purchase these factors.
In the labor market, the demand for labor is determined by the marginal productivity of labor, which refers to the additional output that is generated by hiring one additional unit of labor. Firms will hire additional workers as long as the marginal revenue generated by their work is greater than the cost of hiring them. The demand for labor is also affected by the price of the product being produced, as higher prices will increase the demand for labor.
The pricing of labor is determined by the intersection of the demand and supply curves for labor. The supply of labor is determined by the number of workers who are willing and able to work at a given wage rate. The higher the wage rate, the greater the number of workers who are willing to supply their labor. The pricing of labor is also affected by the skills and productivity of workers, as more skilled workers can command higher wages.
In general, the demand for and pricing of productive factors, including labor, is influenced by a variety of factors such as the level of economic growth, technological change, and government policies. For example, an increase in economic growth may lead to an increase in demand for labor, while government policies such as minimum wage laws may affect the pricing of labor.

name Ononuju Uchenna Esther
reg no 2021/243238
unit. education/economics

Utility can be defined as the total quantity of satisfaction derived from consumption of goods and services. Production is not complete untill it gets to the final consumer utility is measured in utiles, we have five types of utility
Place utility:is a type of satisfaction derived from comsumption of good and services at a particular place eg using fan during rainy season.
Form utility: lts a utility derived from consumption of goods and services derived from consumption of goods by converting it to a particular form eg converting floor to bread.
Time utility: lt is a satisfaction derived from consumption at a particular time.
Possession utility: lt is a satisfaction derived from consumption of good or service you own eg satisfaction from the car you bought for yourself.
2
Cardinal school of thought. Ordinal school of thought
1 Cardinal school of thought: Cardinal school of thought assumes that utility can be measured using a number ranging from one to infinity,it also assume that consumer can be rational it assumes that income can be held constant.
Ordinal school of thought ordinal school of thought assume that utility can can be ranked in ordinal school of thought two commodity are being considered xandy it requires a consumer to draw a scale of preference the criticism is that commodity are not divisible

2 .Labour productivity
If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This would shift the labour demand curve outwards.

Changes in technology
Changes in technology can cause the demand for labour to increase and decrease depending on the situation.

If technological changes make labour more productive relative to the other factors of production (such as capital), firms would demand an increased amount of workers and substitute the other factors of production with new labour.

For example, the production of computer chips will require a certain amount of skilled software and hardware engineers. Thus, the demand for such workers would increase. This would shift the labour demand curve outwards.
However, with the production and subsequent competition from other firms, we could assume that chip development could become automated. The subsequent result would be a replacement of labour with machines. This would shift the labour demand curve inwards.
Changes in the number of firms
Changes in the number of firms operating in the industry can have an immense effect on the overall labour market. This is because demand for a certain factor can be determined by the number of firms currently utilising that factor.

Name: Chibudom Ironuru
Matric Number: 2021/241955
Department: Economics
Level: 100 Level
Course: Principles of Economics 1 (ECO 101)

1.) ELEMENTARY THEORY OF UTILITY
Utility refers to the ability of a given commodity to satisfy the wants of a consumers. The production any commodity is seen as incomplete until it reaches the final consumer and satisfies his/her wants. That is why production is often defined simply, as the production of utility.
Utility is a very hard thing to measure. This is due different issues. One of which, is the fact that level of satisfaction is an abstract concept. Another issue is the fact that human beings don’t have homogeneous tastes and preferences. Therefore, the level of satisfaction a particular person derives a particular quantity of a particular commodity isn’t necessarily the same as that of another. In fact, the level of satisfaction a particular person derives from a particular quantity of a particular commodity at a particular time, isn’t necessarily the same as the level of satisfaction that same person derives from that quantity of that same commodity at another time.

2A.) CARDINAL SCHOOL OF THOUGHT
The cardinal school argues that utility is numerically measurable. That is to say that one’s level of satisfaction can be evaluated using numbers ranging from zero to infinity. The unit of measurement of utility for the cardinal school is called “util”.

ASSUMPTIONS OF THE CARDINAL SCHOOL OF THOUGHT
When propounding theories in economics, one has to make some assumptions regarding certain factors or variables due to the constraints of the social sciences and the cardinal school of thought is no exception. Here are some assumptions made by the school:
1.)The consumer is rational
2.) The commodity is able to be divided into different units.
3.) Utility is measurable
4.) There is are levels of absolute satisfaction
5.) The income of the consumer is constant. That is, it doesn’t change.

2B.) ORDINAL SCHOOL OF THOUGHT
In this school of thought, it is argues that the utility of various commodities cannot be measured. Rather, they are ranked in order of preference. This school of thought argues that utility is a purely psychological element and therefore, cannot be expressed with cardinal numbers.
The ordinal school of thought is founded on the two main principles;
I.) A consumer cannot express his/her utility in quantitative terms. Rather, they can express preference between two or more commodities.
II.) Utility is a Subjective Concept. Therefore, the ranking of utility derived from multiple commodities is relative to each consumer.

ASSUMPTIONS OF THE ORDINAL SCHOOL OF THOUGHT
Just like the cardinal school, the ordinal school’s approach is dependent on certain assumptions. Here are some of them;
1.) The consumer is rational
2.) The consumer is consistent in choice.
3.) The consumer is insatiable
4.) There is a diminishing marginal rate of substitution
5.) There is transitivity of preference

3.) THE DEMAND FOR AND PRICING OF PRODUCTIVE FACTORS
Factors of production are demanded by firms so as to enable them produce the commodities for their businesses (ergo the demand for productive factors is a Derived Demand). Firms when acquiring factors of production have to make decisions on how much to spend on the productive factors, and how much or how many to obtain.

CASE STUDY: THE LABOUR MARKET
The labour market is quite simply the market where the services of labour are bought and sold. In this market, the employees are the suppliers, while the employers are the consumers.
The conventional principles and conventions of demand and pricing are applied in the labour market. The lower the wage level, the higher the number of workers demanded. And of course the demand level is influenced by the level of expertise. level of education, etc. Also the wage level sometimes influenced by government policy. Government puts price floors for workers wages ( ie minimum wage). However, individual wages can sometimes be negotiated between the individual employee and the employer.

Name: Christian Ifechukwu thankGod
Department: Economics
Course: Eco 101
Reg number: 2021/245589

1) In economics, utility is a term used to determine the worth or value of a good or service. More specifically, utility is the total satisfaction or benefit derived from consuming a good or service. Economic theories based on rational choice usually assume that consumers will strive to maximize their utility. The utility definition in economics is derived from the concept of usefulness. An economic good yields utility to the extent to which it’s useful for satisfying a consumer’s want or need. Various schools of thought differ as to how to model economic utility and measure the usefulness of a good or service.
So therefore, Utility in economics, refers to the usefulness or enjoyment a consumer can get from a service or good.

2) CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.

ASSUMPTIONS OF CARDINAL APPROACH
i. Utility is measurable
ii. The consumer is rational
iii. There is diminishing marginal utility
iv. Total utility (TU) depends on the quantity consumed.
v. Money income of the consumer is held constant

b) The Ordinal Utility Theory The ordinal utility approach is a school of thought that believes that utilitycannot be measured quantitatively, that is, utility is not additive rather itcould only be ranked according to preference. The consumer must be ableto determine the order of preference when faced with different bundles ofgoods by ranking the various ‘baskets of goods’ according to thesatisfaction that each bundle gives. For instance, if a consumer derives 3utils from the consumption of one unit of commodity X and 12 utils from theconsumption of commodity Y, this means that the consumer derives moresatisfaction from consuming commodity Y than from commodity X. Thoughto the cardinals, the consumer derives four times more utility from one unitof Y than from X. The ordinal utility theory explains consumer behaviour by the use of indifference curve.

Assumptions of Ordinal Utility Approach
(i) Rationality: – The consumer is assumed to be rational meaning thathe aims at maximizing total utility given his limited income and the prices ofgoods and services.
ii) Utility is Ordinal: – According to this assumption, utility is assumed notto be measurable but can only be ranked according to the order ofpreference for different kinds of goods.
(iii) Transitivity and Consistency of Choice: – By transitivity of choice, itmeans that if a consumer prefers bundle A to B and bundle B to C, theninvariably, the consumer must prefer bundle A to C. Symbolically, it iswritten as: If A > B and B > C; then A > C.By consistency of choice, it is assumed that the consumer is consistent inhis choice making. If two bundles A and B are available to the consumer, ifthe consumer prefers bundle A to B in one period, he cannot choose bundleB over A nor treat them as equal. Symbolically: If A > B, then B > A and A ≠ B
(iv) Diminishing Marginal Rate of Substitution (MRS):- MRS is the rate atwhich the consumer can exchange between two goods and still be at thesame level of satisfaction. This assumption is based on the fact that thepreferences are ranked in terms of indifference curves which are assumedto be convex to the origin.
(v) The Total Utility of the consumer depends on the quantities of thecommodities consumed. That is, the total utility is the addition of thedifferent utilities. u = f(q1, q2 —– qn)
(vi) Non Satiation: – it is assumed that the consumer would always prefer alarger bundle of goods to a smaller bundle of the same good. He is neverover supplied with goods within the normal range of consumption.

3) What is Demand for Labor
When producing goods and services, businesses require labor and capital as inputs to their production process. The demand for labor is an economics principle derived from the demand for a firm’s output. That is, if demand for a firm’s output increases, the firm will demand more labor, thus hiring more staff. And if demand for the firm’s output of goods and services decreases, in turn, it will require less labor and its demand for labor will fall, and less staff will be retained.
Labor market factors drive the supply and demand for labor. Those seeking employment will supply their labor in exchange for wages. Businesses demanding labor from workers will pay for their time and skills.
Demand for labor is a concept that describes the amount of demand for labor that an economy or firm is willing to employ at a given point in time. This demand may not necessarily be in long-run equilibrium. It is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage.
A profit-maximizing entity will command additional units of labor according to the marginal decision rule: If the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to the total cost, the firm will increase profit by increasing its use of labor. It will continue to hire more and more labor up to the point that the extra revenue generated by the additional labor no longer exceeds the extra cost of the labor. This relationship is also called the marginal product of labor (MPL) in the economics community.

**What Is Labor Productivity?
Labor productivity measures the hourly output of a country’s economy. Specifically, it charts the amount of real gross domestic product (GDP) produced by an hour of labor. Growth in labor productivity depends on three main factors: saving and investment in physical capital, new technology, and human capital.
Labor productivity, also known as workforce productivity, is defined as real economic output per labor hour. Growth in labor productivity is measured by the change in economic output per labor hour over a defined period. Labor productivity should not be confused with employee productivity, which is a measure of an individual worker’s output.

Name: ilo destiny chinasa
Department : COMBINED SOCIAL SCIENCES ( economic/ psychology)
course: ECO 101
Reg: 2021/243714
ASSIGNMENT
1.) Discuss the elementary theory of utility
ans: In economics, utility theory tries to explain the behavior of individual consumers in an economy utility theory argues that each person, given a list of options can rank those options in a precise order of preference. each person has different choices which are set ,not changing over time. in other words ,utility is the level of satisfaction a person derives from consuming a good or service. when the product or service is useful to the consumer needs or wants .they can achieve a certain level of utility from consuming it
2.) mention and discuss the different views of utility according to the school of thought
Ans:( i) Cardinal School Of Thought: this approach emphasizes that utility is measurable. that is after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figure which range from zero to infinity.
(ii). Ordinal utility: in ordinal utility, the consumer only ranks choices in terms of preference but we do not give exact numerical figures for utility. for example we prefer a BMW car to a Toyota car but we don’t say by how much .it is argued this is more relevant in the real world. this simply means that the of satisfaction a consumer obtains after consuming various commodities cannot be measured in numbers but can be arranged in order of preference
3) explain the demand for and pricing of productive factors emphasizing on the labour market
Ans: The demand for labor is an economic principle derived from the demand firms output. that is ,if demand of a firm’s output increases, the firm will demand labour, thus hiring more staff .

Nwankwo Augusta Ebube
2021/247116.
Nursing Science.

1) The main hypothesis in the theory of decision is that the person who is in the position of deciding is entitled to the “economic man”. Also, the individual acts rationally. Utility is the ability to satisfy ( eliminate) human needs of goods and services. Utility is basically a psychological concept and also is the basis of economics and finance. Three types of utility takes place in the economics and finance literature. Expected benefit theory assumes that people choose risky or uncertain opportunities by comparing the expected benefits for them. Allais and Ellsberg paradoes criticize expected utility theory. Tversky and Kahneman (econometrics; 47: 263-291, 1979) present that the expected utility axioms are violated for more reasonable lottery alternatives than in the Allais paradox and put a link between finance and psychology.
2) cardinal utility: Bentham (1789) assumes that the value defined as “utility” can be measured numerically (cardinal). According to Bentham, a standard utility scale that can be applied to all people can be developed.
*) Ordinal utility: ordinal utility theory assumes that benefit is an immeasurable magnitude.

Name: Nwuzor Kenneth
Department: Philosophy
Level: 100L
Reg Number: 10691423EC.
Course: ECO 101

Outline
Elementary Theory of Utility..
Views Of Utility In Accordance To Schools of Thoughts.
Emphasis on Labor Market in Demand For Pricing Factors.

The Elementary Theory of Utility

Utility is about making purchase with given prices of commodities as well as a given income in accordance with consumer’s want, desires, taste, preference or indifference. To define Utility, it is the satisfaction derived by a consumer when consuming a particular product.. As Human wants are not fully satisfied and they crave to want more and try more new things that is how the explanation of Utility escalated.

The Views Of Utility In Accordance To The
Schools Of Thoughts.

CARDINAL UTILITY: This concept of Utility, believes Utility is measurable and also stated that consumers are rotational, the range of which one can measure this utility is from 0 to infinity.

ORDINAL UTILITY: In this concept, utility is been ranked and not measured.

Emphasis on Labor Market In Demand For Pricing
Factors.

The demand for labor is defined as the capacity of a particular firm organization to employ a particular range or number of of workers in line with what the economy situation per time.
. This relationship is also called the marginal product of labor (MPL) in the economics community.

Name: CHIBUZOR GODSON CHIKWESIRI.
Reg Number: 2021/244133
Email Address: godson13heir@gmail.com
Course Code: ECO 101

ANSWER.

Question One (1)

THE ELEMENTARY THEORY OF UTILITY.

Concept Of Utility.
Utility measures the amount of satisfaction that an individual receives from the quantity of goods or services utility refers to the ability of goods or services to satisfy unlimited wants of humans. It Alvan also be viewed as the satisfaction, fulfilment or pleasure derived by an individual,groups or firms from the consumption of certain products or services. Products are desired because of their capacity to satisfy human wants or needs. This concept is used to express consumer’s tastes and preferences .The analysis of consumer taste and preferences is a significant step in determining how a consumer maximizes satisfaction in spending income or money generated.Utility is measured in ‘Utils’. A util is an abstraction used by Economists to measure the amount of satisfaction one receives. A util is an abstraction because it’s something inside one’s head, it represents one unit of satisfaction or happiness. You might get 25 utils of satisfaction from eating a bowl of ice cream while someone else would only get 5 utils of satisfaction.
The utility of a consumer is relatively stern to measure. However,it can be determined indirectly with consumer behaviour theory,which assume that consumers will strive to maximise their utility with the resources available to them.

Utility has four (4) basic types existing.These are:

A. Form Utility – Worth of the goods or service based on the combined resources it took to create the goods or service, thus brings it’s form utility or satisfaction to be attained.

B. Time Utility – The utility that is found in offering a good or service to consumers at the right time. When the exact time ones desire is needed, it is obtined, thus time utility is derived.

C. Place Utility – Refers to offering a goods or service in the right place for consumers’ easy accessibility.Thus, utility is derived at that point or place it’s desired.

D. Possession Utility – The satisfaction a consumer gains from owning a certain product/goods.It shows the benefits one derives from the ownership and use of certain products.The more Useful a goods is to an individual when owned,e.g one’s ownership of his)her phone,cars et.c.

Question Two(2)

The Two Schools of Thoughts Which Views the Concept of Utility.

They are as follows:

1. Cardinal School of Thought

2. Ordinal School of Thought

1. CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable.This means that the quantity of goods or services that satisfies the need or want of a consumer can be evaluated through the use of figures ranging from zero(0) to infinity(…) i.e, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity. Cardinal utility assigns a number to the utility, e.g a basket of apples gives a utility of 20 and a bushel of corn is 40.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 a good provides less and less utility. While a consumer might assign the 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.Cardinal utility is a quantitative approach to measuring utility. It presents the utility of something as a fixed number – it’s an exact measure of utility.It’s based on the cardinal counting numbers like 1, 2, 3, 4. For instance,if a boy uses cardinal utility, he will subjectively place a value on the grocery items in a store by assigning a numerical value to them that represents the amount of satisfaction or happiness he will get when he eats it. His numbers might look like this:
Roast beef slices: 40 utils
Fish: 60 utils
Chicken: 75 utils
He is going to choose the chicken because it will provide the most utility.He will also be willing to pay more for chicken than he would for fish or beef.

ASSUMPTIONS OF CARDINAL APPROACH OR SCHOOL OF THOUGHT.

i. Utility is measurable

ii. The consumer is rational

iii. There is diminishing marginal utility

iv. Total utility (TU) depends on the quantity consumed.

v. Money income of the consumer is held constant.

2. ORDINAL SCHOOL OF THOUGHT:
The ordinal approach of utility means ranking items under consideration from most satisfaction to the least. It requires that consumers make a scale of preference, by choosing between the various products that gives one the same level of satisfaction. Ordinal utility is a relative measure of utility. It describes how one can determine the value of a good or service by comparing it to another.Many economists believe that consumers do this in their heads when they make purchase decisions. This approach makes use of an ‘ indifference curve’ i.e a curve indicating the levels of satisfaction attained by a consumer from the consumption of two commodities. of ordinal utility, which uses rankings instead of values. The benefit of using rankings 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.consumers to express the satisfaction derived from a commodity in absolute or numerical terms. Modern Economists hold that utility being a psychological phenomenon, cannot be measured quantitatively, theoretically and conceptually. However, a person can introspectively express whether a goods or service provides more, less or equal satisfaction when compared to one another.
In this way, the measurement of utility is ordinal, i.e. qualitative, based on the ranking of preferences for commodities. For example: Suppose a person prefers tea to coffee and coffee to milk. Hence, he or she can tell subjectively, his/her preferences, i.e. chicken > fish > beef

Lastly, utility is used in the development of indifference curves, which represent the combination of two products that a consumer values equally and independently of price. For example, a consumer might be equally happy with five oranges and two mangoes or two oranges and five mangoes. As a result, five oranges plus two mangoes and two oranges plus five mangoes represent two points on the consumer’s indifference curve.

Question Three(3)

THE DEMAND FOR AND PRICING OF PRODUCTIVE FACTORS.

The modern theory of pricing of factors of production gives a satisfactory answer to the problem of determining factor prices. According to the theory,just as the price of a product is to the theory,just as the price of a commodity is determined by the forces of demand and supply,the price of a factor of production is also determined by the demand for that factor and it’s supply.

Demand For a Factor Of Production.
The demand for a factor is not a direct demand but an indirect or derived demand.The demand for labour for example, is not demand for labour himself but infact, the demand for goods and services which the labour produces.Thus,when demand for goods increases,the demand for the factors which produce those goods would rise also. If demand for a commodity is elastic, the demand for factorswould also be elastic. Similarly, when demand for goods is inelastic,the factor which produces it will also be inelastic.When more of a factor is employed, it’s marginal productiv Asity is likely to decrease hence,it’s demand and price are also likely to decrease. The demand and price of a factor also depends on the market price of the commodity for the production of which the factors are used. If the goods are being sold at high prices,the demand for the factors would also be higher.

Supply Of a Factor Of Production.
This depends upon a number of factors. Using the case of labour; The supply of labour depends upon the size and composition of population, it’s geographical and occupational distribution, efficiency of labour, expected income, etc. Though, one thing that is generally true is that more of labour would be offered in the market when wages are higher compared to what is being offered at lower wage level. It is only a general tendency which may not always be true. If at a higher wage rate, labour begins preferring leisure to work, the supply of labour is likely to decrease thus, the supply curve of labour may be backward sloping. However, such cases are very rare. Therefore, for the purpose of our analysis, the supply curve of labour may be treated to be upward sloping showing that more of labour is supplied when the wages go up.

NAME: OGBAJI PETER ODEY
DEPARTMENT: NURSING SCIENCES
MATRIC NO. 2021/243012

1. Utility theory. bases its beliefs upon individuals’ preferences. It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank order their choices depending upon their preferences.

2. Many theories describe the level of satisfaction. However, cardinal utility and ordinal utility are the two predominant theories of utility. The cardinal utility believes in measuring the satisfaction level in utils and the ordinal utility believes that the satisfaction level cannot be evaluated; however, it can be levelled.

The Cardinalist school asserts that utility can be measured and quantified. It means, it is possible to express utility that an individual derives from consuming a commodity in quantitative terms. Ordinal Approach: The ordinalist school asserts that utility cannot be measured in quantitative terms.

3.Labour productivity
If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This would shift the labour demand curve outwards.

Changes in technology
Changes in technology can cause the demand for labour to increase and decrease depending on the situation.

If technological changes make labour more productive relative to the other factors of production (such as capital), firms would demand an increased amount of workers and substitute the other factors of production with new labour.

For example, the production of computer chips will require a certain amount of skilled software and hardware engineers. Thus, the demand for such workers would increase. This would shift the labour demand curve outwards.

However, with the production and subsequent competition from other firms, we could assume that chip development could become automated. The subsequent result would be a replacement of labour with machines. This would shift the labour demand curve inwards.

What is Productivity and Costs?
Productivity and costs refer to an economic data set that measures future inflationary trends with two indicators. Productivity is the indicator that measures labor efficiency in producing goods and services in the U.S. economy. Costs is the indicator that measures the unit labor costs of producing each unit of output in the U.S. economy. Together, productivity and costs monitor inflationary trends in wages, which usually affect trends of inflation in other areas.

Understanding Productivity And Costs
Both the bond and equity markets seem to be affected in the same direction by productivity data. Because a more efficient workforce can lead to higher corporate profits, equity markets enjoy seeing good productivity growth. The bond markets, which benefit from a low inflationary situation, also prefer to see high productivity due to its role in keeping inflationary pressures down. As productivity growth occurs, inflation is stemmed because the economy can sustain higher growth than could be possible with inefficiencies in the labor markets.

Name: Ameh Emmanuel Chinaecherem
Reg no : 2021/247162
emal: emmanuelchinaecherem115@gmail.com

1) Elementary theory of utility

In economics, utility is a term used to determine the worth or value of a good or service. More specifically, utility is the total satisfaction or benefit derived from consuming a good or service. Economic theories based on rational choice usually assume that consumers will strive to maximize their utility.The economic utility of a good or service is important to understand because it directly influences the demand, and therefore price, of that good or service. In practice, a consumer’s utility is usually impossible to measure or quantify. However, some economists believe that they can indirectly estimate what is the utility of an economic good or service by employing various models.

2) The school of thoughts are:
A) The cardinal school of thoughts
B) The Ordinal school of thoughts.

The Cardinal school of thoughts states that utility can be measured. The consumption theory is based on the notion that consumer aims at maximizing his utility, and thus, all his actions and doings are directed towards the utility maximization.
In the assumption of cardinal utility, it also states that
i) It shows the diminishing law of marginal utility.
ii) it assume that your money income is held constant.
iii) It makes use of two products.

The ordinal school of thoughts states that Utility can be ranked in other of importance.
It deals with one product. So, in simple words, we can say that ordinal utility asserts that it is easier to ask a consumer how good a product is in comparison to others instead of how good any product is. For example, it is easy for anyone to tell if they love pizza or burgers, but now how much he loves pizza or burgers. In assumption of ordinal utility; it’s states
i) Consumers are rational.
ii) Always prefer larger quantities of commodities.
iii) Their choice is consistent and transitive.

3) When producing goods and services, businesses require labor and capital as inputs to their production process. The demand for labor is an economics principle derived from the demand for a firm’s output. That is, if demand for a firm’s output increases, the firm will demand more labor, thus hiring more staff. And if demand for the firm’s output of goods and services decreases, in turn, it will require less labor and its demand for labor will fall, and less staff will be retained.

Labor market factors drive the supply and demand for labor. Those seeking employment will supply their labor in exchange for wages. Businesses demanding labor from workers will pay for their time and skills.
Demand for labor is a concept that describes the amount of demand for labor that an economy or firm is willing to employ at a given point in time. This demand may not necessarily be in
long-run equilibrium. It is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage.
A profit-maximizing entity will command additional units of labor according to the marginal decision rule: If the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to the total cost, the firm will increase profit by increasing its use of labor. It will continue to hire more and more labor up to the point that the extra revenue generated by the additional labor no longer exceeds the extra cost of the labor. This relationship is also called the marginal product of labor (MPL) in the economics community.

1) utility refers to want satisfying power of a commodity.it is the satisfaction,actual or expected derived from consumption of commodity
The utility theory is based on fact that satisfaction which consumers obtain from consumption of goods and service.
And it was theorized by swiss mathematician,Daniel Bernoulli on the 18th century.

2) Cardinal utility: it emphasizes that utility is measurable . that means after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures. Ranging from zero to infinity.
B) ordinal utility: the ordinal utility states that the level of satisfaction a consumer obtains after consuming a commodity Cannot be measured in numbers but can be arranged in the order of preference.

3)
Demand for labour is an economic principle derived from the demand for a firm’s output.
For instance if demand for a firm’s output increases the firm will demand more Labour,thus hiring more staff and if demand for the firm’s output of goods and services decreases, it will require less labour and its demand for labour will fall and less staff will be retained.

Name: Amuh Tobenna Anthony
Reg No: 2020/242720
Department: Nursing Sciences
1. The elementary theory of utility is a fundamental concept in economics that explains how individuals make choices in order to maximize their satisfaction or well-being. According to this theory, individuals make rational decisions based on their preferences and the constraints they face. Utility refers to the satisfaction or happiness that an individual derives from consuming goods and services. The elementary theory of utility assumes that individuals aim to maximize their total utility by allocating their income in a way that provides them with the greatest possible satisfaction. One of the key assumptions of the elementary theory of utility is that individuals have a limited budget or income, which they must use to purchase goods and services. They also have a set of preferences or tastes, which determine the amount of utility they derive from consuming different goods and services.
2. The two schools of thought in economics that have different views on the concept of utility are the cardinal school of thought and the ordinal school of thought. Here are the different views of utility according to these two schools of thought: Cardinal school of thought: The cardinal school of thought assumes that utility can be measured and assigned a numerical value. According to this school, utility is a quantifiable measure of satisfaction or happiness that individuals derive from consuming goods and services. The cardinal school of thought views utility as an objective measure that can be compared across individuals and goods. According to this school, individuals can rank different goods and services based on their utility and make choices that maximize their overall utility. The cardinal school of thought assumes that utility is a linear function of the quantity of a particular good or service consumed. This means that the additional utility or satisfaction an individual derives from consuming an additional unit of a good or service is constant. Ordinal school of thought: The ordinal school of thought challenges the assumptions of the cardinal school and argues that utility cannot be measured or assigned a numerical value. According to this school, utility is a subjective measure of satisfaction or happiness that cannot be compared across individuals or goods. The ordinal school of thought views utility as a ranking of preferences rather than a quantifiable measure. According to this school, individuals can rank different goods and services based on their preferences, but they cannot assign a numerical value to these preferences. The ordinal school of thought assumes that utility is an ordinal function of the quantity of a particular good or service consumed. This means that the additional utility or satisfaction an individual derives from consuming an additional unit of a good or service may not be constant and can vary depending on the individual’s preferences and the context. Overall, the different views of utility according to the cardinal and ordinal schools of thought reflect different assumptions about the nature of utility and its relationship with consumption. While the cardinal school assumes that utility is a measurable and linear function of consumption, the ordinal school argues that utility is a subjective and non-measurable ranking of preferences.
3. The demand for and pricing of productive factors, such as labour, plays a crucial role in determining a society’s overall economic activity and welfare. Here’s an explanation of the demand for and pricing of labour: Demand for labour: The demand for labour is the quantity of labour that employers are willing and able to hire at a given wage rate. The demand for labour is derived from the demand for the goods and services that labour helps produce. In other words, firms will hire labour when the marginal product of labour (the additional output produced by an additional unit of labour) exceeds the wage rate. There are several factors that affect the demand for labour, including the level of technology, the price of output, the availability of other factors of production, and the size of the labour force. Changes in any of these factors can shift the demand for labour curve. Pricing of labour: The price of labour is the wage rate that workers receive in exchange for their labour. The wage rate is determined by the interaction of the demand for and supply of labour. When the demand for labour exceeds the supply of labour, the wage rate will increase, and when the supply of labour exceeds the demand for labour, the wage rate will decrease. There are several factors that affect the supply of labour, including population growth, changes in immigration policy, changes in retirement age, and changes in the labour force participation rate. Changes in any of these factors can shift the supply of the labour curve. The pricing of labour is also affected by the degree of competition in the labour market. In a perfectly competitive labour market, employers and workers are price takers, meaning they have no market power to influence the wage rate. In a non-competitive labour market, such as a monopsony (where there is only one buyer of labour), the employer has market power and can pay a lower wage rate than in a competitive labour market.

Name: ogeobuma Janet Jennifer
Department: social science education
unit: Economics Education
reg no: 10156354JD

1)Utility theory is a positive theory that seeks to explain the individuals’ observed behavior and choices.The distinction between normative and positive aspects of a theory is very important in the discipline of economics. Some people argue that economic theories should be normative, which means they should be prescriptive and tell people what to do. Others argue, often successfully, that economic theories are designed to be explanations of observed behavior of agents in the market, hence positive in that sense in contrast, normative theory, one that dictates that people should behave in the manner prescribed by it. Instead, it is only since the theory itself is positive, after observing the choices that individuals make, we can draw inferences about their preferences. When we place certain restrictions on those preferences, we can represent them analytically using a utility function—a mathematical formulation that ranks the preferences of the individual in terms of satisfaction different consumption bundles provide. Thus, under the assumptions of utility theory, we can assume that people behaved as if they had a utility function and acted according to it.To begin, assume that an individual faces a set of consumption “bundles.” We assume that individuals have clear preferences that enable them to “rank order” all bundles based on desirability, that is, the level of satisfaction each bundle shall provide to each individual. This rank ordering based on preferences tells us the theory itself has ordinal utility—it is designed to study relative satisfaction levels. As we noted earlier, absolute satisfaction depends upon conditions; thus, the theory by default cannot have cardinal utility, or utility that can represent the absolute level of satisfaction. To make this theory concrete, imagine that consumption bundles comprise food and clothing for a week in all different combinations, that is, food for half a week, clothing for half a week, and all other possible combinations

2)CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.

CONCEPT OF TOTAL, AVERAGE AND MARGINAL UTILITY
TOTAL UTILITY: This is the total amount of satisfaction a consumer derives from the consumption of a particular commodity at a point in time. Consumers’ utility increases as the quantity consumed increases but not at equal rate because consumer has a saturation point in the consumption of particular commodity at a given time.

AVERAGE UTILITY: This derived by dividing total utility by

the units of the commodity consumed. That is, it is the satisfaction which a consumer derives per unit of a commodity consumed. AU = TU/Q

3)Demand for labor is a concept that describes the amount of demand for labor that an economy or firm is willing to employ at a given point in time. This demand may not necessarily be in long-run equilibrium. It is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage.

Name: IKE BLESSING ONYINYE
Reg no: 2021/241946
Date: 9/03/2023
Department: Economics

1) Briefly discuss the elementary theory of utility.
2) Mention and discuss the different views of utility according to the two schools of thoughts which you have been taught.

UTILITY THEORY.
What is the utility theory in economics?
In economics, utility theory tries to explain the behavior of individual consumers in an economy. Utility theory argues that each person, given a list of options, can rank those options in a precise order of preference. Each person has different choices which are set, not changing over time.

For example, imagine consumer A consistently prefers hamburgers to hot dogs, while consumer B always wants a hot dog more than a burger.

Utility theory relies on a few assumptions about consumers and their behavior: One assumption is that people can rank any number of options in exact order of preference. The options need not be related, and there is no limit to the number of options that the consumer can rank.

A second assumption is that more total utility is always better. If Bundle A produces 10 units of utility, and Bundle B produces 11 units of utility, the individual will always be better off with Bundle B.

Utility theory also assumes that a mix of goods is better. If a consumer values two items roughly equally, then a combination of the two offers more expected utility. For example, a consumer who considers hot dogs and hamburgers roughly equal would choose to receive one of each over two hotdogs or two hamburgers.

2) Mention and discuss the different views of utility according to the two schools of thoughts which you have been taught.

Cardinal Utility.
It explains that the satisfaction level after consuming any goods or services can be scaled in terms of countable numbers.

– Cardinal Utility is measured based on utils.

Ordinal Utility.
It explains that the satisfaction level after consuming any goods or services cannot be scaled in numbers. However, these things can be arranged in the order of preference.

– Ordinal Utility is ranked based on satisfaction.

3) Explain the demand for and pricing of productive factors emphasizing on the labour market.

What is the demand for labour?
The concept of labour market can be viewed as a ‘factor market.’ Factor markets provide a way for firms and employers to find the employees they need.

The demand for labour shows how many workers the firms are willing and able to hire at a given time and wage rate.

Therefore, demand for labour is a concept that illustrates the amount of labour a firm is willing to employ at a particular wage rate. However, the determination of equilibrium in the labour market will also depend on the supply of labour.

Equilibrium in the labour market depends on the wage rate firms are willing to pay and the amount of labour willing to provide the necessary work.

Factors affecting the demand for labour.
Many factors that can affect the demand for labour.

A: LABOUR PRODUCTIVITY
If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This would shift the labour demand curve outwards.

B: CHANGES IN TECHNOLOGY
Changes in technology can cause the demand for labour to increase and decrease depending on the situation.

If technological changes make labour more productive relative to the other factors of production (such as capital), firms would demand an increased amount of workers and substitute the other factors of production with new labour.

C: CHANGES IN THE NUMBER OF FIRMS.
Changes in the number of firms operating in the industry can have an immense effect on the overall labour market. This is because demand for a certain factor can be determined by the number of firms currently utilising that factor.

D: CHANGES IN DEMAND FOR A PRODUCT THAT LABOUR PRODUCES.
If there is an increase in demand for new vehicles, we would likely see an increase in demand for raw materials used in vehicle production. This would lead to an increase in demand for workers, as firms would need people to manufacture the vehicles. This would shift the labour demand curve outwards.

E: PROFITABILITY OF FIRMS
If a firm’s profitability increases, it will be able to hire more workers. This will lead to an increase in the demand for labour. Conversely, a firm that is making no profit and is consistently registering losses will need to layoff workers as it will not be able to pay them anymore. This would subsequently reduce the demand for labour and shift the demand curve of labour inwards.

Utility can be defined as the total quantity of satisfaction derived from consumption of goods and services. Production is not complete untill it gets to the final consumer utility is measured in utiles, we have five types of utility
Place utility:is a type of satisfaction derived from comsumption of good and services at a particular place eg using fan during rainy season.
Form utility: lts a utility derived from consumption of goods and services derived from consumption of goods by converting it to a particular form eg converting floor to bread.
Time utility: lt is a satisfaction derived from consumption at a particular time.
Possession utility: lt is a satisfaction derived from consumption of good or service you own eg satisfaction from the car you bought for yourself.
2
Cardinal school of thought. Ordinal school of thought
1 Cardinal school of thought: Cardinal school of thought assumes that utility can be measured using a number ranging from one to infinity,it also assume that consumer can be rational it assumes that income can be held constant.
Ordinal school of thought ordinal school of thought assume that utility can can be ranked in ordinal school of thought two commodity are being considered xandy it requires a consumer to draw a scale of preference the criticism is that commodity are not divisible

2 .Labour productivity
If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This would shift the labour demand curve outwards.

Changes in technology
Changes in technology can cause the demand for labour to increase and decrease depending on the situation.

If technological changes make labour more productive relative to the other factors of production (such as capital), firms would demand an increased amount of workers and substitute the other factors of production with new labour.

For example, the production of computer chips will require a certain amount of skilled software and hardware engineers. Thus, the demand for such workers would increase. This would shift the labour demand curve outwards.
However, with the production and subsequent competition from other firms, we could assume that chip development could become automated. The subsequent result would be a replacement of labour with machines. This would shift the labour demand curve inwards.
Changes in the number of firms
Changes in the number of firms operating in the industry can have an immense effect on the overall labour market. This is because demand for a certain factor can be determined by the number of firms currently utilising that factor.

Name :chekwube festus joshua
Reg no:2021/241952
Course:Eco 101

1.Utility theory bases its beliefs upon individuals’ preferences. It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank order their choices depending upon their preferences. Each individual will show different preferences, which appear to be hard-wired within each individual. We can thus state that individuals’ preferences are intrinsic. Any theory, which proposes to capture preferences, is, by necessity, abstraction based on certain assumptions. Utility theory is a positive theory that seeks to explain the individuals’ observed behavior and choices.The distinction between normative and positive aspects of a theory is very important in the discipline of economics. Some people argue that economic theories should be normative, which means they should be prescriptive and tell people what to do. Others argue, often successfully, that economic theories are designed to be explanations of observed behavior of agents in the market, hence positive in that sense. This contrasts with a normative theory, one that dictates that people should behave in the manner prescribed by it. Instead, it is only since the theory itself is positive, after observing the choices that individuals make, we can draw inferences about their preferences. When we place certain restrictions on those preferences, we can represent them analytically using a utility function—a mathematical formulation that ranks the preferences of the individual in terms of satisfaction different consumption bundles provide. Thus, under the assumptions of utility theory, we can assume that people behaved as if they had a utility function and acted according to it. Therefore, the fact that a person does not know his/her utility function, or even denies its existence, does not contradict the theory. Economists have used experiments to decipher individuals’ utility functions and the behavior that underlies individuals’ utility.

2.There are basically two schools of thought in the analysis of utility and they are as follows:

1. Cardinal school of thought

2. Ordinal school of thought.

CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.

ASSUMPTIONS OF CARDINAL APPROACH

i. Utility is measurable

ii. The consumer is rational

iii. There is diminishing marginal utility

iv. Total utility (TU) depends on the quantity consumed.

v. Money income of the consumer is held constant

The Ordinal Utility approach is based on the fact that the utility of a commodity cannot be measured in absolute quantity, but however, it will be possible for a consumer to tell subjectively whether the commodity derives more or less or equal satisfaction when compared to another
Below are assumptions of ordinal theory
I.Transitivity and Consistency of Choice
Ii.Rationality
Iii.Ordinal Utility
Iv.Nonsatiety
V.Diminishing Marginal Rate of Substitution (MRS)

3.The demand for labour shows how many workers the firms are willing and able to hire at a given time and wage rate.

Therefore, demand for labour is a concept that illustrates the amount of labour a firm is willing to employ at a particular wage rate. However, the determination of equilibrium in the labour market will also depend on the supply of labour.

Equilibrium in the labour market depends on the wage rate firms are willing to pay and the amount of labour willing to provide the necessary work.

Name: AUGUSTINE PRECIOUS CHIDERA
Department: Nursing department
Course: Economics 101
Reg number:2021/244493
Email: augustinepreciouschidera@gmail.com
1) Briefly discuss the elementary theory of utility.
In economics, utility is a term used to determine the worth or value of a good or service. More specifically, utility is the total satisfaction or benefit derived from consuming a good or service. Economic theories based on rational choice usually assume that consumers will strive to maximize their utility.

2)Mention and discuss the different views of utility according to the two schools of thoughts which you have been taught.
Ordinal Utility
It explains that the satisfaction level after consuming any goods or services cannot be scaled in numbers. However, these things can be arranged in the order of preference.Example:Sam gets more satisfaction from a pizza as compared to that of a burger.
Cardinal utility
It explains that the satisfaction level after consuming any goods or services can be scaled in terms of countable numbers,It is measured based on utils.Example:Pizza gives Sam 60 utils of satisfaction, whereas burger gives him only 40 utils.

3)Explain the demand for and pricing of productive factors emphasizing on the labour market.
‘Prices of factors’, it means the price a factor should get for
providing its services. Labour gets wages and use of capital is rewarded with interest. Land,
which is an important factor of production, earns rent and an entrepreneur who takes the risk of
business in the environment of uncertainty earns profits – either positive or negative.
The price of a factor service is determined by the demand and supply of that factor.tra a factor adds
to the total output produced by a firm is required to be determined at such time. In economics,
this extra contribution is called as marginal product of labour/factor. Thus, marginal product or
marginal physical product (MPP) of labour/factor is the addition made to the total output by
employing one more unit of labour/factor. For instance, if 5 workers together construct 20 meters
of road length in a day and when one more worker joins them, the road length increases to 25
meters, then the 6th worker’s contribution to the total work is 5 meters. This is marginal physical
productivity of 6th labour. The concept of MPP is primarily developed concerning labour, but it
is equally applicable to other factors, such as land, capital, and organization. Thus, price of labour,
i.e., wages depends upon the MPP of labour. A producer will equate its marginal cost of producingods with the marginal productivity of labour so as to maximize his satisfaction/profits.

My name is Francis-Agbodike Jessica Chimdalu.
School reg no: 2019/249147.
Department: Nursing Science.
Level: 100lvl.

Eco 101 assignment answers:
1. Utility theory argues that each person, given a list of options, can rank those options in a precise order of preference. Each person has different choices which are set, not changing over time.

2. There are two predominant theories of utility, namely Cardinal and Ordinal utility. The cardinal utility believes in measuring the satisfaction level in utils and the ordinal utility believes that the satisfaction level cannot be evaluated; however, it can be levelled.

3. The demand for labor is an economics principle derived from the demand for a firm’s output. That is, if demand for a firm’s output increases, the firm will demand more labor, thus hiring more staff. This would shift the labour demand curve outwards. The labor market comprises four components: the labor force population, applicant population, applicant pool, and the individuals selected.

Name. Ogbuka ifesinachi shedrach
Reg : No. 2021/244662
Department. Nursing science

1)Suppose you went to a restaurant and ordered your favourite food. What will you experience? Either the food satisfies your taste buds or not. Another day you went to another restaurant an ordered the same food. Is the experience the same? Maybe or may not be.the satisfaction you get from consuming each food in different restaurants at a particular period of them is the utility of the food . So you can say that utility is the satisfaction you get from consuming goods and services.
There are four types of utility namely
Time. utility
Place. utility
Form. utility
Possession utility

2) cardinal and ordinal school of thought

*Cardinal school of thought =The notion of Cardinal utility was formulated by Neo-classical economists, who hold that utility is measurable and can be expressed quantitatively or cardinally, i.e. 1, 2, 3, and so on.
*ordinal school of thought = the ordinal school of thought believes that utility can not be measured quantitatively ,that utility is not addictive rather it could only be ranked according to preference .

3)Demand for productive factor
The type of factors of production employed is influenced by the type of product produced, the productivity of the factors and their cost. A firm producing a standardised model of car is likely to be very capital intensive whereas a beauty salon is likely to be labour intensive.
When factors of production are substitutes, a rise in the productivity or fall in the cost of one of them may result in a change in the combination of resources being employed. A fall in the price of capital goods, for example, might lead to the replacement of some workers with machines hence producing goods and services, businesses require labour and capital as inputs to their production process. with this I can say that demand for labour in labour market is how many workers the firms are willing and able to hire at a given time and wage rate or how many workers the labour market can offer for hiring at a given time and wage rate.
*Price of productive factors
An entrepreneur pays rent, wages, interest, and profit for availing the services of land, labor, capital, and enterprise respectively. The theory of factor pricing deals with the price determination of different factors of production. Taking labour for an instance you can say that price of productive factor as it concerns to labour is the wages entrepreneur pays for the services rendered by labourers in a particular firm. When there is a shortage of workers who have the skills, talents, experience and education necessary to complete the tasks an employer needs done, the few workers who are available can demand higher pay. Conversely, as the number of workers available increases, employers can start offering lower wages

Name: TABANSI JOHNBOSCO CHIJINDU
REG NUMBER: 2021/245662
ANSWERS
1) UTILITY: utility refers to the ability of goods or services to satisfy unlimited human wants . It can also be viewed as satisfaction , pleasure, or fulfillment an individual derives from the consumption of goods and services. Goods are desired because of their ability to satisfy Human wants. The concept of utility is used to Express consumers taste and preferences. The analysis of consumer tastes and preferences is a crucial step in determining how a consumer maximizes satisfaction in spending income. The utility of a consumer is relatively hard to measure. . again utility is measured in utilis and is the maximum satisfaction derived from consumption of goods and services..
2) types of utility according to school of thoughts include..
a) TIME UTILITY.. this is the satisfaction derived by a consumer from goods and services at a particular time. This is to say that a commodity or service does not satisfy a need all the time. The more easily and quickly goods and services can be purchased and used at that time., The higher its perceived time utility. In addition time utility is always high in times of scarcity. For eg the purchase of ice water during the dry season. Will be higher than its purchase during the rainy season because the weather is always hot (during dry season) and people often desire something cold to quench their trust..
B) FORM UTILITY: the transformation of goods from one form to another for goods to confer satisfaction when consumed is referred to as form utility. The transformation ability of goods and services into various needs and desires of a consumer, confers on the goods or services an increased added value (form utility) this means that some commodities do not have utility until they are transformed from one form to another. For eg flour cannot be consumed directly in other to derive satisfaction , its utility comes when used for the baking of cakes, bread etc.
C) PLACE utility this can be obtained through the process of making goods or services more easily available to potential consumers. This implies that the easier it is to purchase a product, the more attractive it becomes. Thus, place utility is the ability of goods and services to satisfy a need within a location and it is a function of distribution channels and physical locations at which goods or services are sold. For eg. a bookshop has no satisfaction within a construction site but will satisfy a need if found within a citadel of learning..
D) POSSESSION UTILITY:
This refers to the satisfaction derived from the ownerships of goods and services. It explains the benefits one derives from owning and using a certain products. The more useful a product is to an individual when owned The higher its possession utility. This means that goods that are owned have a greater utility (satisfaction) than goods which are borrowed. For eg, a man who owns a car has a greater satisfaction from his car than a man who borrowed it
3) demand for
The demand for a factor is not a direct demand but an indirect or derived demand. The demand for labour for example is not demand for labour himself but infact , Demand for goods and services which the labour produces. Thus when demand for goods increase, the demand for the factors which produce those goods would also rise. If demand for goods is elastic, the demand for factors would also be elastic, similarly, when demand for goods is inelastic, the factor which produces it will also be inelastic. When more of a factor is employed , its marginal productivity is likely to fall and hence its demand and price are also likely to become lower. The demand and price of a factor also depends upon the market price of the goods for the production of which the factor is used. If the goods are being sold at high prices , the demand for the factors would also be higher…
The modern theory of pricing of factors of production also know as demand and supply theory gives a satisfactory answer to the problem of determing factor prices. According v to the theory, just as the price of a commodity is determined by the forces of demand supply, the price of a factor of production is also determined by the demand for that factor and its supply

Name:Udeji chiamaka favour
Reg no:2021/245634
Email address:chifavour8287@gmail.com
Pubic administration and local government
1.In economics,utility theory explains the behaviour of individuals in the commodity or economy.
It argues that each person given a list of option can put those options in a good scale of preference,each person has different choices.
Utility theory relies on few assumptions,one of the assumption is that mixing of goods is better,if a consumer values or needs two items urgently then a combination of the two offers more expected utility.
Utility theory lies on rational decision making,it also explains why consumers act the way they do and also how they purchase goods.

2.i.Cardinal school of thought
ii.Ordinal school of thought
A.Cardinal school of thought:It emphasizes that utility is measurable,that is after consuming a given amount of commodity,the consumer can simply evaluate his satisfaction through the use of figures ranging from o to infinity.
B.Ordinal school of thought:This states that satisfaction can’t be measured in the exact numbers but can only be ranked or put in order.
An individual is preferred to make one choice over others.
However,the both are the two predominant theories of utility,the cardinal believes in measuring satisfaction while ordinal believes satisfaction cannot be measured or evaluated
3.a.The demand for goods and services
The demand for the factors of production is a derived demand.
For example,if a bread baker benefits from an increase in the demand of bread,he will definitely need more flour to meet the demand.

b.The price for different factors of production
The prices of alternative factors of production are monitored by firms in order to ensure they are maximizing profits.

Name: Edoga Chinenye Mary
Department: Nursing Sciences
Reg no: 2021/243506
Date: 9th March ,2023.
Answers:
1. Utility is satisfaction derived from consuming goods. It is also the ability of goods and services to satisfy human wants.
There are four main types of utility, they include:
i. Time Utility: This is the satisfaction derived from consuming a particular commodity at a particular time.
ii. Place Utility: This is the satisfaction derived based in how easy it is to get a particular commodity at a particular time.
iii. Form Utility: Utility derived when you change a form of something into a thing that satisfies your want. For example flour can be transformed into making cake, bread, chin chin etc.
iv. Possession Utility: It is the satisfaction derived from consuming products that you own.
2. The two school of thoughts are:
a. Cardinal School of thought
b. Ordinal School of thought.

a. Cardinal School of Thought: This school of thought emphasizes that utility can be measured using numbers ranging from zero to infinity. It said that utility is measured in imaginary units called ‘Utils’.
b. Ordinal School of thought: This school of thought emphasizes that utility cannot be measured but it can be ranked. According to this school of thought, utility can be measured by ranking of preferences of a commodity when compared with each other.
3.The demand for labour is an economics principle derived from the demand for a firm’s output. That is, if demand for a firm’s output increases, the firm will demand more labour, thus hiring more staff. And if demand for the firm’s output of goods and services decreases, in turn, it will require less labour and its demand for labour will fall, and less staff will be retained.Demand for labour is a concept that describes the amount of demand for labour that an economy or firm is willing to employ at a given point in time. This demand may not necessarily be in long-run equilibrium. It is determined by the real wage firms are willing to pay for this labour and the number of workers willing to supply labour at that wage.

Qeastion number (1)
Alfred marshal,s theory of utility
The concept of utility is cardinal the price that a consumer is willing to pay for a good is an indication of the utility of that good to the consumer total utility which is the sum of the utility which a consumer derives from the consumption of the different unit of a good.
Adam Smith’s theory of utility
He considered and rejected the idea that demand must be related to utility, this may seem self evident ,the more useful a thing is the more satisfaction it gives, the more people would be willing to pay for it
The ordinal utility
Early economists of the Spanish Scholastic tradition of the 1300s and 1400s described the economic value of goods as deriving directly from this property of usefulness and based their theories on prices and monetary exchanges
This conception of utility was not quantified, but a qualitative property of an economic good.
Later economists, particularly those of the Austrian School, developed this idea into an ordinal theory of utility, or the idea that individuals could order or rank the usefulness of various discrete units of economic goods
Austrian economist Carl Menger, in a discovery known as the marginal revolution, used this type of framework to help him resolve the diamond-water paradox that had vexed many previous economists. Because the first available units of any economic good will be put to the most highly valued uses, and subsequent units go to lower-valued uses, this ordinal theory of utility is useful for explaining the law of diminishing marginal utility and fundamental economic laws of supply and demand

Cardinal Utility
To Bernoulli and other economists, utility is modeled as a quantifiable or cardinal property of the economic goods that a person consumes.
To help with this quantitative measurement of satisfaction, economists assume a unit known as a “util” to represent the amount of psychological satisfaction a specific good or service generates for a subset of people in various situations.
The concept of a measurable util makes it possible to treat economic theory and relationships using mathematical symbols and calculations.

However, it separates the theory of economic utility from actual observation and experience, since “utils” cannot actually be observed, measured, or compared between different economic goods or between individuals

If, for example, an individual judges that a piece of pizza will yield 10 utils and that a bowl of pasta will yield 12 utils, that individual will know that eating the pasta will be more satisfying. For the producers of pizza and pasta, knowing that the average bowl of pasta will yield two additional utils will help them price pasta slightly higher than pizza.

Additionally, utils can decrease as the number of products or services consumed increases. The first slice of pizza may yield 10 utils, but as more pizza is consumed, the utils may decrease as people become full. This process will help consumers understand how to maximize their utility by allocating their money between multiple types of goods and services as well as help companies understand how to structure tiered pricing.Total Utility
If utility in economics is cardinal and measurable, the total utility (TU) is defined as the sum of the satisfaction that a person can receive from the consumption of all units of a specific product or service.

Using the example above, if a person can only consume three slices of pizza and the first slice of pizza consumed yields ten utils, the second slice of pizza consumed yields eight utils, and the third slice yields two utils, the total utility of pizza would be twenty utils.Marginal Utility
Marginal utility (MU) is defined as the additional (cardinal) utility gained from the consumption of one additional unit of a good or service or the additional (ordinal) use that a person has for an additional unit.

Using the same example, if the economic utility of the first slice of pizza is ten utils and the utility of the second slice is eight utils, the MU of eating the second slice is eight utils. If the utility of a third slice is two utils, the MU of eating that third slice is two utils.

In ordinal utility terms, a person might eat the first slice of pizza, share the second slice with their roommate, save the third slice for breakfast, and use the fourth slice as a doorstop.
That utility is one of the principal sources of beauty has been observed by every body, who has considered with any attention what constitutes the nature of beauty. The conveniency of a house gives pleasure to the spectator as well as its regularity, and he is as much hurt when he observes the contrary defect, as when he sees the correspondent windows of different forms, or the door not placed exactly in the middle of the building. That the fitness of any system or machine to produce the end for which it was intended, bestows a certain propriety and beauty upon the whole, and renders the very thought and contemplation of it agreeable, is so very obvious that nobody has overlooked it.(1) Utility theory bases its beliefs upon individuals’ preferences. It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank order their choices depending upon their preferences. Each individual will show different preferences, which appear to be hard-wired within each individual. We can thus state that individuals’ preferences are intrinsic. Any theory, which proposes to capture preferences, is, by necessity, abstraction based on certain assumptions. Utility theory is a positive theory that seeks to explain the individuals’ observed behavior and choices.The distinction between normative and positive aspects of a theory is very important in the discipline of economics. Some people argue that economic theories should be normative, which means they should be prescriptive and tell people what to do. Others argue, often successfully, that economic theories are designed to be explanations of observed behavior of agents in the market, hence positive in that sense. This contrasts with a normative theory, one that dictates that people should behave in the manner prescribed by it. Instead, it is only since the theory itself is positive, after observing the choices that individuals make, we can draw inferences about their preferences. When we place certain restrictions on those preferences, we can represent them analytically using a utility function—a mathematical formulation that ranks the preferences of the individual in terms of satisfaction different consumption bundles provide. Thus, under the assumptions of utility theory, we can assume that people behaved as if they had a utility function and acted according to it. Therefore, the fact that a person does not know his/her utility function, or even denies its existence, does not contradict the theory. Economists have used experiments to decipher individuals’ utility functions and the behavior that underlies individuals’ utility.

To begin, assume that an individual faces a set of consumption “bundles.” We assume that individuals have clear preferences that enable them to “rank order” all bundles based on desirability, that is, the level of satisfaction each bundle shall provide to each individual. This rank ordering based on preferences tells us the theory itself has ordinal utility—it is designed to study relative satisfaction levels. As we noted earlier, absolute satisfaction depends upon conditions; thus, the theory by default cannot have cardinal utility, or utility that can represent the absolute level of satisfaction. To make this theory concrete, imagine that consumption bundles comprise food and clothing for a week in all different combinations, that is, food for half a week, clothing for half a week, and all other possible combinations.

The utility theory then makes the following assumptions:

Completeness: Individuals can rank order all possible bundles. Rank ordering implies that the theory assumes that, no matter how many combinations of consumption bundles are placed in front of the individual, each individual can always rank them in some order based on preferences. This, in turn, means that individuals can somehow compare any bundle with any other bundle and rank them in order of the satisfaction each bundle provides. So in our example, half a week of food and clothing can be compared to one week of food alone, one week of clothing alone, or any such combination. Mathematically, this property wherein an individual’s preferences enable him or her to compare any given bundle with any other bundle is called the completeness property of preferences.
More-is-better: Assume an individual prefers consumption of bundle A of goods to bundle B. Then he is offered another bundle, which contains more of everything in bundle A, that is, the new bundle is represented by αA where α = 1. The more-is-better assumption says that individuals prefer αA to A, which in turn is preferred to B, but also A itself. For our example, if one week of food is preferred to one week of clothing, then two weeks of food is a preferred package to one week of food. Mathematically, the more-is-better assumption is called the monotonicity assumption on preferences. One can always argue that this assumption breaks down frequently. It is not difficult to imagine that a person whose stomach is full would turn down additional food. However, this situation is easily resolved. Suppose the individual is given the option of disposing of the additional food to another person or charity of his or her choice. In this case, the person will still prefer more food even if he or she has eaten enough. Thus under the monotonicity assumption, a hidden property allows costless disposal of excess quantities of any bundle.
Mix-is-better: Suppose an individual is indifferent to the choice between one week of clothing alone and one week of food. Thus, either choice by itself is not preferred over the other. The “mix-is-better” assumption about preferences says that a mix of the two, say half-week of food mixed with half-week of clothing, will be preferred to both stand-alone choices. Thus, a glass of milk mixed with Milo (Nestlè’s drink mix), will be preferred to milk or Milo alone. The mix-is-better assumption is called the “convexity” assumption on preferences, that is, preferences are convex.
Rationality: This is the most important and controversial assumption that underlies all of utility theory. Under the assumption of rationality, individuals’ preferences avoid any kind of circularity; that is, if bundle A is preferred to B, and bundle B is preferred to C, then A is also preferred to C. Under no circumstances will the individual prefer C to A. You can likely see why this assumption is controversial. It assumes that the innate preferences (rank orderings of bundles of goods) are fixed, regardless of the context and time.
If one thinks of preference orderings as comparative relationships, then it becomes simpler to construct examples where this assumption is violated. So, in “beats”—as in A beat B in college football. These are relationships that are easy to see. For example, if University of Florida beats Ohio State, and Ohio State beats Georgia Tech, it does not mean that Florida beats Georgia Tech. Despite the restrictive nature of the assumption, it is a critical one. In mathematics, it is called the assumption of transitivity of preferences.

Whenever these four assumptions are satisfied, then the preferences of the individual can be represented by a well-behaved utility function.The assumption of convexity of preferences is not required for a utility function representation of an individual’s preferences to exist. But it is necessary if we want that function to be well behaved. Note that the assumptions lead to “a” function, not “the” function. Therefore, the way that individuals represent preferences under a particular utility function may not be unique. Well-behaved utility functions explain why any comparison of individual people’s utility functions may be a futile exercise (and the notion of cardinal utility misleading). Nonetheless, utility functions are valuable tools for representing the preferences of an individual, provided the four assumptions stated above are satisfied. For the remainder of the chapter we will assume that preferences of any individual can always be represented by a well-behaved utility function. As we mentioned earlier, well-behaved utility depends upon the amount of wealth the person owns.

Utility theory rests upon the idea that people behave as if they make decisions by assigning imaginary utility values to the original monetary values. The decision maker sees different levels of monetary values, translates these values into different, hypothetical terms (“utils”), processes the decision in utility terms (not in wealth terms), and translates the result back to monetary terms. So while we observe inputs to and results of the decision in monetary terms, the decision itself is made in utility terms. And given that utility denotes levels of satisfaction, individuals behave as if they maximize the utility, not the level of observed dollar amounts.

While this may seem counterintuitive, let’s look at an example that will enable us to appreciate this distinction better. More importantly, it demonstrates why utility maximization, rather than wealth maximization, is a viable objective. The example is called the “St. Petersburg paradox.” But before we turn to that example, we need to review some preliminaries of uncertainty: probability and statistics.
Qeastion number( 2)
(A)CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.

ASSUMPTIONS OF CARDINAL APPROACH

i. Utility is measurable ii. The consumer is rational

iii. There is diminishing marginal utility

iv. Total utility (TU) depends on the quantity consumed.

v. Money income of the consumer is held constant
(B) ordinary school of thought _ the ordinal approach to consumers utility states that the utility/satisfaction cannot be measured in exact numbers but can only be ranked or put into order, this approach argues that utility/satisfaction is completely a psychological element and it cannot be expressed in cardinal number.
CONCEPT OF TOTAL, AVERAGE AND MARGINAL UTILITY
TOTAL UTILITY: This is the total amount of satisfaction a consumer derives from the consumption of a particular commodity at a point in time. Consumers’ utility increases as the quantity consumed increases but not at equal rate because consumer has a saturation point in the consumption of particular commodity at a given time.

AVERAGE UTILITY: This derived by dividing total utility by

the units of the commodity consumed. That is, it is the satisfaction which a consumer derives per unit of a commodity consumed. AU = TU/Q

MARGINAL UTILITY: This means the additional satisfaction a consumer derives from the consumption of additional unit of a particular commodity. It is then the change in the total utility as a result of the consumption of additional unit of a commodity. MU = ∆TU/∆QTHE LAW OF DIMINISHING MARGINAL UTILITY

The law of diminishing marginal utility states that, other things being equal, the marginal utility of a commodity to an individual decreases with extra unit of that commodity he consumes. In other words, the law states that if a consumer goes on consuming successive equal increments in the quantity of a commodity, then the increase in total utility resulting will become smaller and smaller, that is, satisfaction per extra unit will start falling. For instance, a beer drinker may derive maximum satisfaction in the first three bottles, after which decrease in satisfaction may set in as more and more bottles of beer are consumed until he may be unable to consume anymore.

UTILITY MAXIMIZATION
Utility maximization is also known as equilibrium of the consumer. A point where a consumer derives maximum satisfaction when his marginal utility equates the price of the commodity consumed. That is, the additional utility derived from the consumption of additional commodity is equal to price of the commodity.

In the case of one commodity, a consumer will maximize his satisfaction in the consumption of a particular commodity when the MU of that commodity equals the price of that commodity, eg MUx = Px

In the case of two or more commodities, a consumer is said to be in equilibrium or maximizes his utility when the ratio of MU of the last unit of the commodities consumed should be equal to the ratio of the price. Alternatively, a consumer’s utility is maximized when the MU per amount spent on a product is equal to the MU per amount spent on any other product, as stated below:

Mux/Px = Muy/Py = MUz/Pz

where MUx = MU of commodity X

Px = Price of commodity X

MUy = MU of commodity Y

Py = Price of commodity Y

MUz = MU of commodity Z

Pz = Price of commodity Z

CONSUMER SURPLUS
Consumer surplus is define as the difference between the amount a consumer budgeted to pay for a commodity based on the anticipated level of satisfaction, and the amount he actually paid to have it. When he consumed the first unit, he was willing to pay as much as #50, but the commodity’s price was #30. Thus, he saved #20. Therefore any amount above the market price of #30 represents the consumer’s surplus.
Qeastion number (3)
Markets for labor have demand and supply curves, just like markets for goods. The law of demand applies in labor markets this way: A higher salary or wage—that is, a higher price in the labor market—leads to a decrease in the quantity of labor demanded by employers, while a lower salary or wage leads to an increase in the quantity of labor demanded. The law of supply functions in labor markets, too: A higher price for labor leads to a higher quantity of labor supplied; a lower price leads to a lower quantity supplied.The law of demand applies in labor markets this way: A higher salary or wage—that is, a higher price in the labor market—leads to a decrease in the quantity of labor demanded by employers, while a lower salary or wage leads to an increase in the quantity of labor demanded .Labour demand is defined as the amount of labour that employers seek to hire during a given time period at a particular wage rate. The demand for labour as a factor of production is a derived demand, in that labour is demanded not for its own sake but for its contribution to the production of goods and services.

Equilibrium in the Labor Market
In 2013, about 34,000 registered nurses worked in the Minneapolis-St. Paul-Bloomington, Minnesota-Wisconsin metropolitan area, according to the BLS. They worked for a variety of employers: hospitals, doctors’ offices, schools, health clinics, and nursing homes. This example below illustrate how demand and supply determine equilibrium in this labor market. The demand and supply schedules in Table 1 list the quantity supplied and quantity demanded of nurses at different salaries.

This table shows how equilibrium is affected by demand and supply. The demand curve and the upward-sloping supply curve intersect at equilibrium salary.
Figure 1. Labor Market Example: Demand and Supply for Nurses in Minneapolis-St. Paul-Bloomington. The demand curve (D) of those employers who want to hire nurses intersects with the supply curve (S) of those who are qualified and willing to work as nurses at the equilibrium point (E). The equilibrium salary is $70,000 and the equilibrium quantity is 34,000 nurses. At an above-equilibrium salary of $75,000, quantity supplied increases to 38,000, but the quantity of nurses demanded at the higher pay declines to 33,000. At this above-equilibrium salary, an excess supply or surplus of nurses would exist. At a below-equilibrium salary of $60,000, quantity supplied declines to 27,000, while the quantity demanded at the lower wage increases to 40,000 nurses. At this below-equilibrium salary, excess demand or a surplus exists.
Annual Salary Quantity Demanded Quantity Supplied
$55,000 45,000 20,000
$60,000 40,000 27,000
$65,000 37,000 31,000
$70,000 34,000 34,000
$75,000 33,000 38,000
$80,000 32,000 41,000
Table 1. Demand and Supply of Nurses in Minneapolis-St. Paul-Bloomington
The horizontal axis shows the quantity of nurses hired. In this example, labor is measured by number of workers, but another common way to measure the quantity of labor is by the number of hours worked. The vertical axis shows the price for nurses’ labor—that is, how much they are paid. In the real world, this “price” would be total labor compensation: salary plus benefits. It is not obvious, but benefits are a significant part (as high as 30 percent) of labor compensation. In this example, the price of labor is measured by salary on an annual basis, although in other cases the price of labor could be measured by monthly or weekly pay, or even the wage paid per hour. As the salary for nurses rises, the quantity demanded will fall. Some hospitals and nursing homes may cut back on the number of nurses they hire, or they may lay off some of their existing nurses, rather than pay them higher salaries. Employers who face higher nurses’ salaries may also try to replace some nursing functions by investing in physical equipment, like computer monitoring and diagnostic systems to monitor patients, or by using lower-paid health care aides to reduce the number of nurses they need.

As the salary for nurses rises, the quantity supplied will rise. If nurses’ salaries in Minneapolis-St. Paul-Bloomington are higher than in other cities, more nurses will move to Minneapolis-St. Paul-Bloomington to find jobs, more people will be willing to train as nurses, and those currently trained as nurses will be more likely to pursue nursing as a full-time job. In other words, there will be more nurses looking for jobs in the area.

At equilibrium, the quantity supplied and the quantity demanded are equal. Thus, every employer who wants to hire a nurse at this equilibrium wage can find a willing worker, and every nurse who wants to work at this equilibrium salary can find a job. In Figure 1, the supply curve (S) and demand curve (D) intersect at the equilibrium point (E). The equilibrium quantity of nurses in the Minneapolis-St. Paul-Bloomington area is 34,000, and the equilibrium salary is $70,000 per year. This example simplifies the nursing market by focusing on the “average” nurse. In reality, of course, the market for nurses is actually made up of many smaller markets, like markets for nurses with varying degrees of experience and credentials. Many markets contain closely related products that differ in quality; for instance, even a simple product like gasoline comes in regular, premium, and super-premium, each with a different price. Even in such cases, discussing the average price of gasoline, like the average salary for nurses, can still be useful because it reflects what is happening in most of the submarkets.

When the price of labor is not at the equilibrium, economic incentives tend to move salaries toward the equilibrium. For example, if salaries for nurses in Minneapolis-St. Paul-Bloomington were above the equilibrium at $75,000 per year, then 38,000 people want to work as nurses, but employers want to hire only 33,000 nurses. At that above-equilibrium salary, excess supply or a surplus results. In a situation of excess supply in the labor market, with many applicants for every job opening, employers will have an incentive to offer lower wages than they otherwise would have. Nurses’ salary will move down toward equilibrium.

In contrast, if the salary is below the equilibrium at, say, $60,000 per year, then a situation of excess demand or a shortage arises. In this case, employers encouraged by the relatively lower wage want to hire 40,000 nurses, but only 27,000 individuals want to work as nurses at that salary in Minneapolis-St. Paul-Bloomington. In response to the shortage, some employers will offer higher pay to attract the nurses. Other employers will have to match the higher pay to keep their own employees. The higher salaries will encourage more nurses to train or work in Minneapolis-St. Paul-Bloomington. Again, price and quantity in the labor market will move toward equilibrium.

Shifts in Labor Demand
The demand curve for labor shows the quantity of labor employers wish to hire at any given salary or wage rate, under the ceteris paribus assumption. A change in the wage or salary will result in a change in the quantity demanded of labor. If the wage rate increases, employers will want to hire fewer employees. The quantity of labor demanded will decrease, and there will be a movement upward along the demand curve. If the wages and salaries decrease, employers are more likely to hire a greater number of workers. The quantity of labor demanded will increase, resulting in a downward movement along the demand curve.

Shifts in the demand curve for labor occur for many reasons. One key reason is that the demand for labor is based on the demand for the good or service that is being produced. For example, the more new automobiles consumers demand, the greater the number of workers automakers will need to hire. Therefore the demand for labor is called a “derived demand.” Here are some examples of derived demand for labor:

The demand for chefs is dependent on the demand for restaurant meals.
The demand for pharmacists is dependent on the demand for prescription drugs.
The demand for attorneys is dependent on the demand for legal services.
As the demand for the goods and services increases, the demand for labor will increase, or shift to the right, to meet employers’ production requirements. As the demand for the goods and services decreases, the demand for labor will decrease, or shift to the left. Table 2 shows that in addition to the derived demand for labor, demand can also increase or decrease (shift) in response to several factors.

1.Utility theory bases its beliefs upon individuals’ preferences. It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank order their choices depending upon their preferences. Each individual will show different preferences, which appear to be hard-wired within each individual. We can thus state that individuals’ preferences are intrinsic. Any theory, which proposes to capture preferences, is, by necessity, abstraction based on certain assumptions. Utility theory is a positive theory that seeks to explain the individuals’ observed behavior and choices.The distinction between normative and positive aspects of a theory is very important in the discipline of economics. Some people argue that economic theories should be normative, which means they should be prescriptive and tell people what to do. Others argue, often successfully, that economic theories are designed to be explanations of observed behavior of agents in the market, hence positive in that sense. This contrasts with a normative theory, one that dictates that people should behave in the manner prescribed by it. Instead, it is only since the theory itself is positive, after observing the choices that individuals make, we can draw inferences about their preferences.

2._cardinal Utility
_ordinal Utility
CARDINAL UTILITY The cardinal utility believes in measuring the satisfaction level in utils and the ORDINAL UTILITY believes that the satisfaction level cannot be evaluated; however, it can be levelled.

3.If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase .This would shift the labour demand curve outward.

Name: Egwu chiamaka Eunice
Reg no: 2021/243727
Department: public administration and local government
Level: 100

1. The elementary theory of utility simply talks about satisfaction..satisfaction a consumer derives in consuming a particular good/services at a particular time which is its utility.
.
2. The Cardinals and ordinal School of thought namely..
i. The cardinal school of thought emphasizes that utility can be measured, i.e when a consumer consumes a certain quantity of a commodity, he can evaluate his satisfaction with the use of figures ranging from 0 to infinity, utility is measure in “utils”

ii. Ordinal School of thought emphasizes that utility cannot be measured unlike the cardinal School of thought, but that utility can be ranked according to preference of a consumer.
.
3. The demand for and pricing of productive factors, including labor, is determined by the interplay of various factors such as supply and demand, technological advancements, and economic policies. The labor market is an essential component of this equation as it involves the buying and selling of human labor, which is a critical input for producing goods and services.

The demand for labor is determined by the demand for the goods and services produced by the labor. When businesses and consumers demand more goods and services, firms need to hire more workers to increase production. As a result, the demand for labor increases. Conversely, when the demand for goods and services decreases, firms reduce their production, and the demand for labor decreases.

The pricing of labor, or the wage rate, is determined by the intersection of the demand and supply of labor. The supply of labor is determined by the number of workers willing and able to work at a particular wage rate. Generally, the supply of labor increases as the wage rate increases because workers are willing to supply more labor at higher wage rates.

The demand for labor, on the other hand, decreases as the wage rate increases because firms may substitute other factors of production, such as capital, for labor when the cost of hiring workers becomes too high. The wage rate is therefore determined by the equilibrium point where the demand for labor and the supply of labor intersect.

In addition to supply and demand, other factors such as skill level, education, and experience can also affect the pricing of labor. Skilled workers are generally in higher demand, and their wages are higher than those of unskilled workers. Furthermore, economic policies such as minimum wage laws, labor regulations, and taxes can also affect the demand for and pricing of labor.

Overall, the demand for and pricing of labor in the productive factor market is determined by the interplay of supply and demand, technology, economic policies, and other factors that affect the productivity of labor.

1) Utility is simply the satisfaction a consumer derives from consuming a particular good or service
2) Cardinal school of thought: This is a predominant theory that believes that utility can be measured in utils.
Ordinal School of thought: This theory believes that utility cannot be measured however it can be levelled
3) I think u need to understand the two terms “The pricing of productive factors”and “labour market”…when we say productive factors,we mean the factors of production (labour,land, capital, entrepreneur) …the factor pricing refers the entrepreneur pays for availing these factors of production…how does it affect the labour Market??The labour Market is where workers,that is labour and it’s employee (the entrepreneur ) interact with each other…. what happens in the labour Market eg buying and selling and you can also discuss on the effect of low compensation from the entrepreneur on labour,u talk about the activities that happens in the labour market e.g labour market factors derived the supply and demand for labor..those seeking employment will supply their labour in exchange of wages etc..

Name: OKEKE DANIEL AYOMIDE
Reg No: 10574211FD
Email: olasunkanmidaniels28@gmail.com
Department: Economics
Course: Eco 101.

Answers to the assignment

Question 1
Utility theory is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measure quantitative.

Question 2.
CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.
What is the concept of ordinal utility? The concept of ordinal utility states that the level of satisfaction a consumer obtains after consuming various commodities cannot be measured in numbers but can be arranged in the order of preference.

question 3
The demand for factors is a derived demand. This is because the demand for a factor of production (input) is derived from the demand of output. If the demand of output is high, then the demand for input or factor of production would also be high and vice versa.
The type of factors of production employed is influenced by the type of product produced, the productivity of the factors and their cost. A firm producing a standardised model of car is likely to be very capital intensive whereas a beauty salon is likely to be labour intensive.

When factors of production are substitutes, a rise in the productivity or fall in the cost of one of them may result in a change in the combination of resources being employed. A fall in the price of capital goods, for example, might lead to the replacement of some workers with machines.

1)Utility theory is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measured quantitatively (in util).
2a)Cardinal school of thoughts : This approach emphasizes that utility is measurable.That is, after consuming a given quantity of a commodity, the consumer can simply evaluate his satisfaction through the use of figures which ranges from zero to infinity.
The consumers measures the utility which they are deriving from a commodity in cardinal numbers to compare them with the price of the commodity so that they can decide rationally whether to buy the commodity or not.
2b)Ordinal utility is a function representing the preference of an agent on an ordinal scale.it claims that it is only useful to ask which option is better than the other but it is meaningless to ask how much better it is or how good it is.
3)The demand for labour is an economic principle derived from the demand for a firm’s output
Demand for labour is a concept that describes the amount of demand for labour that an economy of firm is willing to employ at a given point in time.
This demand may not necessarily be in long run equilibrium.It is determined by the real wage firms are willing to pay for this labour and the number of workers willing to supply labour at that wage.

Name: Chukwuma Favour Chidera
Reg no: 2021/242783
(1) The elementary theory of utility: Utility refers to the ability of goods and services to satisfy unlimited human wants . It can also be seen as the satisfaction one derives from a good or service rendered.
The concept of utility is used to express consumer’s tastes and preference . Also, the utility a consumer derives from a commodity can be measured by the consumer’s attitude or behavior.
(2). Cardinal school of thought: This school of thought emphasizes that utility is measurable . That is to say that the quantity of goods or services that satisfies the need of the consumer can be evaluated through the use of numbers ranging from zero to infinity.
Cardinal school of thought also encompasses assumptions derived from total utility, marginal utility and average utility .
(2)(b). Ordinal school of thought: This school of thought assumes that utility can be ranked at various levels of consumption . It makes use of an indifference curve that indicates the level of satisfaction a consumer derives from the consumption of a commodity. A combination of indifference curves is known indifference map.
(3). The demand for and pricing of production factor gives a satisfactory answer to the problem of the factor price . just as the price of a commodity is determined by forces of demand and supply , the price of commodities in the labour market is governed by forces of demand and supply.

Name:Madu Ugochi Juliet
Reg no:2021/246120
Course:Eco 101
Dept:Public Administration And Local Governments
Faculty:social sciences

1) Briefly discussion the elementary theories of utility.

Utility is interested in people’s preferences or value and with assumption about a person’s preference in numerically useful ways,it can also be said as a theory postulated in economics to explain behavior of individual based on the premises people can constantly rank order their choices depending upon their preferences

2) Mention and discuss the different view of utility according to the two schools of thought which you have been taught.

A) Cardinal school of thought
B) Ordinal school of thought

A) Cardinal school of thought:Cardinal utility determine the satisfaction of a commodity used by an individual and can be supported with a numerical value.
Cardinal also assumes that marginal utility decreases or diminishes with each extra unit of consumption known as law of diminishing majority utility.while ordinal states that

B) Utility cannot be measured,satisfaction which a consumer derives from the consumption of products or services cannot be measured numerically .
Ordinal states that satisfaction of user goods can be ranked in order of preference but cannot be evaluated.

The measuring term for cardinal and ordinal utility is utils and ranks respectively,utils is the unit of utility and ranks determines the preference of a product compared to the other product in the market.

3) Explain the demand for and pricing of productive factors,emphasizing on the labour market.
Decision related to demand and pricing are usually called marketing decisions.Economic reasoning and concept provides much of the theoretical foundation for marketing practice,related to labor market is an economic function in an economy function with demand and supply of labor in the market,labour demands is forms demand,for labor and supply is the worker’s supply of labour.

Reg no:10600712JA Department:PALG

1. Utility theory is an economic hypothesis that postulates the fact that consumers make purchase decisions based in the degree of utility or satisfaction they obtain from a given item. This means that the higher the utility level the higher the item will be prioritized in the consumer’s budget.

2.The two school of thoughts are:
A.Cardinal school of thought
B.Ordinal school of thought

A.Cardinal school of thought: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.

B.Ordinal school of thought: The ordinal approach to consumer’s utility states that the utility cannot be measured in exact numbers but can only be ranked or put into order. This approach argues that utility/satisfaction is completely a psychological element and it cannot be expressed in cardinal numbers.

3. Demand for labor is a concept that describes the amount of demand for labor that an economy or firm is willing to employ at a given point in time. This demand may not necessarily be in long-run equilibrium. It is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage.

The productive factors emphasizing on the labour market are ;
1.Changes in production level, in the aggregate, it is measured by economic growth.
2.Changes in production processes and technological advances.
3.Quality of human resources.
4.Number of companies in the market.
5.Government regulations such as local labor recruitment and wage policies.

Name:Udeji chiamaka favour
Reg no:2021/
Email address:chifavour8287@gmail.com
1.In economics,utility theory explains the behaviour of individuals in the commodity or economy.
It argues that each person given a list of option can put those options in a good scale of preference,each person has different choices.
Utility theory relies on few assumptions,one of the assumption is that mixing of goods is better,if a consumer values or needs two items urgently then a combination of the two offers more expected utility.
Utility theory lies on rational decision making,it also explains why consumers act the way they do and also how they purchase goods.

2.i.Cardinal school of thought
ii.Ordinal school of thought
A.Cardinal school of thought:It emphasizes that utility is measurable,that is after consuming a given amount of commodity,the consumer can simply evaluate his satisfaction through the use of figures ranging from o to infinity.
B.Ordinal school of thought:This states that satisfaction can’t be measured in the exact numbers but can only be ranked or put in order.
An individual is preferred to make one choice over others.
However,the both are the two predominant theories of utility,the cardinal believes in measuring satisfaction while ordinal believes satisfaction cannot be measured or evaluated

1. Briefly discuss the elementary theory of utility.
Utility theory is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measure quantitative.
2. Mention and discuss the different views of utility according to the two schools of thought which you have been taught.
a). Cardinal school of thought.
b). Ordinal school of thought.
Cardinal school of thought emphasizes that utility is measurable.that is,after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which ranges from zero to infinity.
Ordinal school of thought emphasizes that utility is classified based on scale of preference.It is not measurable.
3). Explain the demand for pricing of productive factor emphasizing on the labour market.
If the labour productivity increases, firms will demand more labour at each wage and the firm’s demand for labour itself will increase.This would shift the labour demand curve outwards.

1. Utility theory is based on the fact that satisfaction which consumer drived from consumption of goods and services can be measure quantitative.
Utility is amount of satisfaction that a consumer derives from the consumption of goods and services at a particular time.

2. Cardinal utility is the idea of measuring economic value through imaginary units known as “utils”
Ordinal utility States that satisfaction of a consumer get after consuming a good or service cannot be scaled in numbers where as these things can be arranged in the order of preference.
Cardinal utility is quantitative
Ordinal utility is qualitative
3. The demand for a factor is not a direct demand but it is an indirect or derived demand. The demand for labour for example is not demand for labour himself. If wage rate increase demand for labour will fall and supply will rise which may cause competition among labourers. Contrary to it if the wage rate falls then supply of labour will fall and demand will rise which may cause competition among producers to employ more and more labourers.

Name:Obiorah Chioma merit
Reg No:2021/241673
Email Address: chiomamerit04@gmail.com

1. THE ELEMENTARY THEORY OF UTILITY:

Utility refers to the ability of goods and services to satisfy unlimited human wants.In economics, utility refers to the satisfaction levels consumers receive from buying and using a product or service. According to utility theory, people make purchase decisions based on the degree of satisfaction they get from an item or service.Goods are desired because of their ability to satisfy human wants. The concept of utility is used to express consumers tastes and preferences. The analysis of consumer taste and preferences is a crucial step in determining how a consumer maximizes satisfaction in spending income. Thus when a consumer derives satisfaction from consuming goods and services, it can be said that the goods and services consumed or utilized possess utility, which is relative to the consumer depending on time, place, form, and possession.

2.THE DIFFERENT VIEWS OF UTILITY ACCORDING TO THE TWO DIFFERENT SCHOOLS OF THOUGHT:

The different views of utility according to the two different schools of thought are;
I. Cardinal School of Thought
II. Ordinal School of Thought

I. Cardinal School of Thought: This school of thought emphasizes that utility is measurable. approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.

II. Ordinal School of Thought: Here, it is required that the consumer makes a scale of preference by choosing between various commodities that give the same level of satisfaction. It assumes that utility can be ranked at various levels of consumption.

3. THE DEMAND FOR AND PRICING OF PRODUCTIVE FACTORS EMPHASIZING ON THE LABOUR MARKET:

The demand for a productive factor is not a direct demand but an indirect or derived demand. The demand for labour is not demand for labour itself but infact, demand for the goods and services which the labour produces. Thus, if demand increases the demand for factors which produce those goods will also rise. If the demand for goods is elastic, the demand for factors would also be elastic. Similarly when the demand for goods is inelastic, the productive factor would also be inelastic.
Suppose that an increase in price of rice has made rice production more profitable than before. This would be because the increase in the price of rice will increase the value of the marginal product of labour. That is, with higher price, the added output from an extra worker is more valuable than before. Rice farmers would want to increase production to take advantage of the increase in price. To do so they would hire more workers.

Kalu Valentina Onyinyechi
2021/246562
Economics department

1: Utility is defined as the satisfaction a consumer derived from consuming a particular product at a particular time. It is the satisfaction derived from a product, it is based on the value, usefulness or what that is attributed to a certain good or service. It captures the usefulness and satisfaction found in using a product.

2: Cardinal School of thought
Ordinal school of thought

* Cardinal School of thought is an approach that emphasizes that utility is measurable, that is after consuming a given quantity of a commodity,the consumer can simply evaluate his satisfaction through the use of figures which range from 0 to infinity . Total utility depends on the quantity consumed by a consumer

* Ordinal school of thought believes that the satisfaction level cannot be measured or evaluated but however it can be levelled or ranked. This approach argues that utility is completely a psychological element and it cannot be expressed in cardinal numbers.

3:. Factors of production can be defined as elements used in producing goods and services. The type of factors of production employed is influenced by the type of product produced and productivity of the factors and their cost.
A firm producing a standard model of car is likely to be a very capital-intensive whereas a beauty salon is likely to be labour-intensive. When factors of production are substitute a rise in the or productivity or fall in the cost of one of them will result in a change in the combination of resources being employee. Productivity is a key factor influencing demand. For labour in terms of skilled labour,the concentration of firms or industries will lead to increase in demand for labour.
Labour market is define as a place where employees and workers are in close contact with each other or interact with each other. The demand for labour is defined as the number of workers that are willing and able to be hired for work at a particular time and given wage rates. Labour market describes the amount and market wage rate workers and employers settle upon at any given time.

1. Meaning of Utility:
Utility refers to want satisfying power of a commodity. It is the satisfaction, actual or expected, derived from the consumption of a commodity. Utility differs from person- to-person, place-to-place and time-to-time. In the words of Prof. Hobson, “Utility is the ability of a good to satisfy a want”.

In short, when a commodity is capable of satisfying human wants, we can conclude that the commodity has utility.

How to Measure Utility?
After understanding the meaning of utility, the next big question is: How to measure utility? According to classical economists, utility can be measured, in the same way, as weight or height is measured. For this, economists assumed that utility can be measured in cardinal (numerical) terms. By using cardinal measure of utility, it is possible to numerically estimate utility, which a person derives from consumption of goods and services. But, there was no standard unit for measuring utility. So, the economists derived an imaginary measure, known as ‘Util’.

Utils are imaginary and psychological units which are used to measure satisfaction (utility) obtained from consumption of a certain quantity of a commodity.

Example – Measurement of satisfaction in utils:

Suppose you have just eaten an ice-cream and a chocolate. You agree to assign 20 utils as utility derived from the ice-cream. Now the question is: how many utils be assigned to the chocolate? If you liked the chocolate less, then you may assign utils less than 20.
However, if you liked it more, you would give it a number greater than 20. Suppose, you assign 10 utils to the chocolate, then it can be concluded that you liked the ice-cream twice as much as you liked the chocolate.

One more way to measure utility:

Utils cannot be taken as a standard unit for measurement as it will vary from individual to individual. Hence, several economists including Marshall, suggested the measurement of utility in monetary terms. It means, utility can be measured in terms of money or price, which the consumer is willing to pay.

In the above example, suppose 1 util is assumed to be equal to Rs. 1. Now, an ice-­cream will yield utility worth Rs. 20 (as 1 util = Rs. 1) and chocolate will give utility of Rs. 10. This utility of Rs. 20 from the ice-cream or f I0 from the chocolate is termed as value of utility in terms of money.
The advantage of using monetary values instead of utils is that it allows easy comparison between utility and price paid, since both are in the same units.

It must be noted that it is impossible to measure satisfaction of a person as it is inherent to the individual and differs greatly from person-to-person. Still, the concept of utility is very useful in explaining and understanding the behaviour of consumer.

Total Utility (TU):
Total utility refers to the total satisfaction obtained from the consumption of all possible units of a commodity. It measures the total satisfaction obtained from consumption of all the units of that good. For example, if the 1st ice-cream gives you a satisfaction of 20 utils and 2nd one gives 16 utils, then TU from 2 ice-creams is 20 + 16 = 36 utils. If the 3rd ice-cream generates satisfaction of 10 utils, then TU from 3 ice-creams will be 20+ 16 + 10 = 46 utils.

TU can be calculated as:
TUn = U1 + U2 + U3 +……………………. + Un

Where:

TUn = Total utility from n units of a given commodity

U1, U2, U3,……………. Un = Utility from the 1st, 2nd, 3rd nth unit
n = Number of units consumed

Marginal Utility (MU):
Marginal utility is the additional utility derived from the consumption of one more unit of the given commodity. It is the utility derived from the last unit of a commodity purchased. As per given example, when 3rd ice-cream is consumed, TU increases from 36 utils to 46 utils. The additional 10 utils from the 3rd ice-cream is the MU.

In the words of Chapman, “Marginal utility is addition made to total utility by consuming one more unit of a commodity”.

MU can be calculated as: MUn = TUn – TUn-1
Where: MUn = Marginal utility from nth unit; TUn = Total utility from n units;

TUn-1 = Total utility from n – 1 units; n = Number of units of consumption

MU of 3rd ice-cream will be: MU3 = TU3 – TU2 = 46 – 36 = 10 utils One More way to Calculate MU

MU is the change in TU when one more unit is consumed. However, when change in units consumed is more than one, then MU can also be calculated as:

ATU

MU = Change in Total Utility/ Change in number of units = ∆TU/∆Q

Total Utility is Summation of Marginal Utilities:
Total utility can also be calculated as the sum of marginal utilities from all units, i.e.

TUn= MU1 + MU2 + MU3 +……………………… + MUn or simply,

TU = ∑MU

2. Total Utility:
Total Utility (TU) implies overall level of satisfaction derived from a good by a consumer. In other words, TU can be defined as an aggregate sum of satisfaction that a consumer receives from consuming a specified amount of good or service in an economy. The amount of a consumer’s TU corresponds to the consumer’s level of consumption.
Suppose a consumer three units of a chocolate A and derives utility from them as U1, U2 and U3. In such a case, TU from chocolate A would be:

UA = U1 + U2 + U3

If a consumer consumes n number of chocolates (a, b, c…), then

2. Marginal Utility:
In economics terms, Marginal Utility (MU) can be defined as additional utility gained from the consumption of an additional unit of a good. In other words, MU implies the utility derived from additional unit consumed.

The formula for MU is:

MUA = ∆TUA/∆QA

Where

∆TUA = Change in TU

∆QA = Change in quantity consumed

Another formula for MU is:

MUn = TUn – TUn-1

3. Labor Demand and Supply in a Perfectly Competitive Market
In addition to making output and pricing decisions, firms must also determine how much of each input to demand. Firms may choose to demand many different kinds of inputs. The two most common are labor and capital.
The demand and supply of labor are determined in the labor market. The participants in the labor market are workers and firms. Workers supply labor to firms in exchange for wages. Firms demand labor from workers in exchange for wages.

The firm’s demand for labor. The firm’s demand for labor is a derived demand; it is derived from the demand for the firm’s output. If demand for the firm’s output increases, the firm will demand more labor and will hire more workers. If demand for the firm’s output falls, the firm will demand less labor and will reduce its work force.

Marginal revenue product of labor. When the firm knows the level of demand for its output, it determines how much labor to demand by looking at the marginal revenue product of labor. The marginal revenue product of labor (or any input) is the additional revenue the firm earns by employing one more unit of labor. The marginal revenue product of labor is related to the marginal product of labor. In a perfectly competitive market, the firm’s marginal revenue product of labor is the value of the marginal product of labor.

For example, consider a perfectly competitive firm that uses labor as an input. The firm faces a market price of $10 for each unit of its output. The total product, marginal product, and marginal revenue product that the firm receives from hiring 1 to 5 workers are reported in tables.

The marginal revenue product of each additional worker is found by multiplying the marginal product of each additional worker by the market price of $10. The marginal revenue product of labor is the additional revenue that the firm earns from hiring an additional worker; it represents the wage that the firm is willing to pay for each additional worker. The wage that the firm actually pays is the market wage rate, which is determined by the market demand and market supply of labor. In a perfectly competitive labor market, the individual firm is a wage‐taker; it takes the market wage rate as given, just as the firm in a perfectly competitive product market takes the price for its output as given. The market wage rate in a perfectly competitive labor market represents the firm’s marginal cost of labor, the amount the firm must pay for each additional worker that it hires.

The perfectly competitive firm’s profit‐maximizing labor‐demand decision is to hire workers up to the point where the marginal revenue product of the last worker hired is just equal to the market wage rate, which is the marginal cost of this last worker. For example, if the market wage rate is $50 per worker per day, the firm—whose marginal revenue product of labor is given in Table —would choose to hire 3 workers each day.

The firm’s labor demand curve. The firm’s profit‐maximizing labor‐demand decision is depicted graphically in Figure .

This figure graphs the marginal revenue product of labor data from Table along with the market wage rate of $50. When the marginal revenue product of labor is graphed, it represents the firm’s labor demand curve. The demand curve is downward sloping due to the law of diminishing returns; as more workers are hired, the marginal product of labor begins declining, causing the marginal revenue product of labor to fall as well. The intersection of the marginal revenue product curve with the market wage determines the number of workers that the firm hires, in this case 3 workers.

An individual’s supply of labor. An individual’s supply of labor depends on his or her preferences for two types of “goods”: consumption goods and leisure. Consumption goods include all the goods that can be purchased with the income that an individual earns from working. Leisure is the good that individuals consume when they are not working. By working more (supplying more labor), an individual reduces his or her consumption of leisure but is able to increase his or her purchases of consumption goods.

In choosing between leisure and consumption, the individual faces two constraints. First, the individual is limited to twenty‐four hours per day for work or leisure. Second, the individual’s income from work is limited by the market wage rate that the individual receives for his or her labor skills. In a perfectly competitive labor market, workers—like firms—are wage‐takers; they take the market wage rate that they receive as given.

An individual’s labor supply curve. An example of an individual’s labor supply curve is given in Figure .

As wages increase, so does the opportunity cost of leisure. As leisure becomes more costly, workers tend to substitute more work hours for fewer leisure hours in order to consume the relatively cheaper consumption goods, which is the substitution effect of a higher wage.

An income effect is also associated with a higher wage. A higher wage leads to higher real incomes, provided that prices of consumption goods remain constant. As real incomes rise, individuals will demand more leisure, which is considered a normal good—the higher an individual’s income, the easier it is for that individual to take more time off from work and still maintain a high standard of living in terms of consumption goods.

The substitution effect of higher wages tends to dominate the income effect at low wage levels, while the income effect of higher wages tends to dominate the substitution effect at high wage levels. The dominance of the income effect over the substitution effect at high wage levels is what accounts for the backward‐bending shape of the individual’s labor supply curve.

Market demand and supply of labor. Many different markets for labor exist, one for every type and skill level of labor. For example, the labor market for entry level accountants is different from the labor market for tennis pros. The demand for labor in a particular market—called the market demand for labor—is the amount of labor that all the firms participating in that market will demand at different market wage levels. The market demand curve for a particular type of labor is the horizontal summation of the marginal revenue product of labor curves of every firm in the market for that type of labor. The market supply of labor is the number of workers of a particular type and skill level who are willing to supply their labor to firms at different wage levels. The market supply curve for a particular type of labor is the horizontal summation of the individuals’ labor supply curves. Unlike an individual’s supply curve, the market supply curve is not backward bending because there will always be some workers in the market who will be willing to supply more labor and take less leisure time, even at relatively high wage levels.

[10/03, 8:38 am] tobennadaniel84@gmail.com: 1. Elementary Theory of Utility…..
economic theories are designed to be explanations of observed behavior of agents in the market, hence positive in that sense. This contrasts with a normative theory, one that dictates that people should behave in the manner prescribed by it. Instead, it is only since the theory itself is positive, after observing the choices that individuals make, we can draw inferences about their preferences. When we place certain restrictions on those preferences, we can represent them analytically using a utility function—a mathematical formulation that ranks the preferences of the individual in terms of satisfaction different consumption bundles provide. Thus, under the assumptions of utility theory, we can assume that people behaved as if they had a utility function and acted according to it. Therefore, the fact that a person does not know his/her utility function, or even denies its existence, does not contradict the theory. Economists have used experiments to decipher individuals’ utility functions and the behavior that underlies individuals’ utility.
[10/03, 8:40 am] tobennadaniel84@gmail.com: 2. VIEWS OF UTILITY…
Cardinal Utility Economics Examples
What is a cardinal utility economics example? Cardinal utility is a quantitative approach to measuring utility. It presents the utility of something as a fixed number – it’s an exact measure of utility. An individual can rank goods or services according to their cardinal utility by comparing the utility numbers derived from the goods or services. For example, a bunch of 20 bananas can be said to have a cardinal utility of 20, whereas a bunch of 10 only has a utility value of 10.

Ordinal Utility Economics Examples
What is an ordinal utility economics example? Ordinal utility is a relative measure of utility. It describes how one can determine the value of a good or service by comparing it to another. This measurement only captures which good or service is better, not how much better it is. Customers might assign value to goods or services according to ordinal utility. For example, a man asks his friend which one of two local barbershops is better. His friend tells him barber B is better because his skills are more refined. This is a relative measure as one can’t quantitatively measure how much better the one barber cuts hair compared to the other.

Utility in Economics: Supply and Demand
Utility plays a big role in economics with respect to supply and demand. The law of diminishing marginal utility refers to how the utility gained from a certain good or service decreases as consumption increases. The more sodas you drink the less satisfaction you gain from drinking another soda. This concept naturally affects the demand curve in the following illustrated way:

The more an individual consumes, the less the need.

Graph showing how marginal utility decreases as consumption increases.
[10/03, 8:41 am] tobennadaniel84@gmail.com: 3. DEMAND AND PRICING OF PRODUCTIVE FACTORS……
What is Demand for Labor
When producing goods and services, businesses require labor and capital as inputs to their production process. The demand for labor is an economics principle derived from the demand for a firm’s output. That is, if demand for a firm’s output increases, the firm will demand more labor, thus hiring more staff. And if demand for the firm’s output of goods and services decreases, in turn, it will require less labor and its demand for labor will fall, and less staff will be retained.

Labor market factors drive the supply and demand for labor. Those seeking employment will supply their labor in exchange for wages. Businesses demanding labor from workers will pay for their time and skills.

BREAKING DOWN Demand for Labor
Demand for labor is a concept that describes the amount of demand for labor that an economy or firm is willing to employ at a given point in time. This demand may not necessarily be in long-run equilibrium. It is determined by the real wage firms are willing to pay for this labor and the number of workers willing to supply labor at that wage.

A profit-maximizing entity will command additional units of labor according to the marginal decision rule: If the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to the total cost, the firm will increase profit by increasing its use of labor. It will continue to hire more and more labor up to the point that the extra revenue generated by the additional labor no longer exceeds the extra cost of the labor. This relationship is also called the marginal product of labor (MPL) in the economics community.

Name:Anamala ogechukwu Ruth
Reg:2021/242160
Email: ogechukwuanamala@gmail.com
Department: palg student

(1) Utility theory in economics pertain to the value or worth of a certain good service or item ,it suggests that goods service and the items can be ranked according to their usefulness. The premise was initially theorized by swiss , mathematician Daniel Bernoulli,in the 18th century . Bernoulli founded the with regard to the different values of things with respect to theory,the utility of an item tend to be closely correctly to it prices

(2)1 Cardinal school of thought
2 Ordinal school of thought
Cardinal utility :is a quantitative approach to measuring it present the utility of something as a fixed number ..it is an exact measure of utility .
An individual can ranked goods and services according to their cardinal utility by comparing the utility numbers derived from the goods or services… examples bunch of 20 bananas can be said to have a cardinal utility of 20 where as a bunch of 10 only has a utility value of 10

Ordinal utility
Is a relative measure of utility. It describes how one can determine the value of a good or service by comparing it to another, this measurement only captures which good or service is better ,not how much better it is customer might assign value to goods or service according to ordinal utility
Eg .. a man ask his friend which one of the two local barber shop is better ,his friend tell him barber B is better because his skills are more refined

(3)
Factors of production labour
Labour actually means any type of physical or mental exertion .
In economic term , labour is the effort exerted to produce any goods or services,it include all types of human efforts physical exertion , mental exercise,use of intellect ,etc
Done in exchange for an economic reward
Labour productivity is defined as output worker or per hour worked .factors that can affect labour productivity include workers skills , technology change, management practices and changes in other input (such as capital) mutifactor productivity (MFP) is defined as output per unit of combined input . combined input typically include labour and capital,but can be expand to include energy, material and services

Labour market factors drive the supply and demand for labor..those seeking employment will supply their labour in exchange for wages … Business demand labour from workers will pay for their time and skills

1: Briefly discuss the elementary theory of utility
Answer:
Utility is the amount of satisfaction derived from the use of a commodity at a particular time. Utility can be said to be a mental state the refers to the amount of satisfaction the consumer estimate to have,after the consumption of a certain good or commodity in a particular time .The utility of any product ,relates to something at a particular time.

2: Mention and discuss Views of utility according to the two schools of thoughts .which you have been thought
Answer:
THE CARDINAL SCHOOL OF THOUGHT
The cardinal school of thought emphasizes that utility is measurable.This means that the quantity of goods or services that satisfies the need of a consumer can be evaluated through the use of figures ranging from zero to infinity.
Assumptions of cardinal approach:
1:Total Utility (TU) depends on the quantity of goods and services
2: Money income of the consumer is held constant
3:There is diminishing marginal utility (MU)
4: The consumer is rational
5: Utility is measurable
THE ORDINAL SCHOOL OF THOUGHT
The original approach of utility requires that consumers make a scale of preference by choosing between the various commodities that gives one the same level of satisfaction.This approach assumes that utility can be ranked at various levels of consumption.This approach makes use of an indifference curve (a curve that indicates the level of satisfaction attained by a consumer from the Consumption of two commodities). A combination of indifference curve is known as an indifference map.

3: Explain the demand for and pricing of productive factors emphasizing on the Labour market
Answer:
The productive factors are governed by the forces of demand and supply. Labour like other goods in the economy is governed by demand and supply. The demand and supply for Labour determine the wage or price paid for Labour services .The demand curve reflects the value of marginal product of Labour, Therefore in equilibrium ,workers receives the value of their marginal contribution to the production of goods and services.

NAME: OSIM PHILIP BASSEY
REG. NUMBER: 2021/241942

1) Briefly discuss the elementary theory of utility
DEFINITION OF UTILITY
Utility is the amount of satisfaction that you will get from the consumption of a product or service. Utility can also be defined as the satisfaction derived from the consumption of a given commodity. Hence, when a consumer derives satisfaction from the consumption of a commodity, it can be said that the commodity or service possesses utility.
Utility therefore, is relative to a consumer, depending on the time, place, form, etc.
When Marie makes her weekly trip to the grocery store, she’ll be making many quick decisions about what she buys. She probably has a number in her head that is the most she wants to spend on this trip. That means her objective will be to get the most happiness or satisfaction from every dollar she is going to spend.
We all know that the concept of happiness is impossible to quantify or put into numerical terms, but economists will try anyway.
Economists use an abstract measure for the amount of satisfaction you receive from something; it is called a ‘util’. A util is an abstraction because it isn’t something in the physical world like an inch or a pound. It is something inside your head, it represents one unit of satisfaction or happiness. You might get 25 utils of satisfaction from eating a bowl of ice cream while someone else would only get 5 utils of satisfaction.
THEORY OF UTILITY
Utility theory in economics pertains to the value or worth of a certain good, service, or item. It suggests that goods, services, and items can be ranked according to their usefulness. The premise was initially theorized by Swiss mathematician, Daniel Bernoulli, in the 18th century. Bernoulli founded the idea with regard to the differing values of things. With respect to theory, the utility of an item tends to be closely correlated to its price. An item such as gold, which is very useful and thus has great utility (combined with its scarcity), is very expensive. Total utility is closely tied to the bare concept of utility. Total utility points to the aggregate amount of usefulness and fruition there is to be gained from the use of a specific good, service, or other item. Furthermore, the abstract measurement of utility is another key concept of the theory. Although it’s hard to calculate the exact utility of something, economists use abstract measure
BASIC ASSUMPTIONS OF UTILITY THEORY
The four basic assumptions of utility theory are that a customer can rank any number of given options, more total utility is always better than less, a mix of goods is better than a set of one good, and customers are rational decision makers:
1. Ranking Options – An individual can rank any number of options based on their utility and the amount of satisfaction they’ll gain from each
2. More Total Utility is Better – For a good, service, or any other item, having more total utility is always better than having less as it points to more gratification found in the good, service, or item
3. Variety is Better – To have a diversified set of goods is better than to have a set of only one good. This is due to the increased usefulness found in differing goods compared to a single good
4. Rational Consumers – It is generally assumed that individuals are rational decision makers who’ll always make the best choice in light of utility
TYPES OF UTILITY
There are also different types of utility, such as:
1. Form Utility – Worth of the good or service based on the combined resources it took to create the good or service
2. Time Utility – The utility that is found in offering a good or service to consumers at the right time
3. Place Utility – Refers to offering a good or service in the right place for consumers’ easy accessibility
4. Possession Utility – The satisfaction a consumer gains from owning a certain product/good.

2) VIEWS OF UTILITY ACCORDING TO THE TWO SCHOOL OF THOUGHTS
There are basically two schools of thought in the analysis of utility and they are as follows:
1. Cardinal school of thought
2. Ordinal school of thought.
CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.
ASSUMPTIONS OF CARDINAL APPROACH
i. Utility is measurable
ii. The consumer is rational
iii. There is diminishing marginal utility
iv. Total utility (TU) depends on the quantity consumed.
v. Money income of the consumer is held constant

CONCEPT OF TOTAL, AVERAGE AND MARGINAL UTILITY
TOTAL UTILITY: This is the total amount of satisfaction a consumer derives from the consumption of a particular commodity at a point in time. Consumers’ utility increases as the quantity consumed increases but not at equal rate because consumer has a saturation point in the consumption of particular commodity at a given time.
AVERAGE UTILITY: This derived by dividing total utility by the units of the commodity consumed. That is, it is the satisfaction which a consumer derives per unit of a commodity consumed. AU = TU/Q
MARGINAL UTILITY: This means the additional satisfaction a consumer derives from the consumption of additional unit of a particular commodity. It is then the change in the total utility as a result of the consumption of additional unit of a commodity. MU = ∆TU/∆Q
THE LAW OF DIMINISHING MARGINAL UTILITY
The law of diminishing marginal utility states that, other things being equal, the marginal utility of a commodity to an individual decreases with extra unit of that commodity he consumes. In other words, the law states that if a consumer goes on consuming successive equal increments in the quantity of a commodity, then the increase in total utility resulting will become smaller and smaller, that is, satisfaction per extra unit will start falling. For instance, a beer drinker may derive maximum satisfaction in the first three bottles, after which decrease in satisfaction may set in as more and more bottles of beer are consumed until he may be unable to consume anymore.
UTILITY MAXIMIZATION
Utility maximization is also known as equilibrium of the consumer. A point where a consumer derives maximum satisfaction when his marginal utility equates the price of the commodity consumed. That is, the additional utility derived from the consumption of additional commodity is equal to price of the commodity.
In the case of one commodity, a consumer will maximize his satisfaction in the consumption of a particular commodity when the MU of that commodity equals the price of that commodity, eg MUx = Px
In the case of two or more commodities, a consumer is said to be in equilibrium or maximizes his utility when the ratio of MU of the last unit of the commodities consumed should be equal to the ratio of the price. Alternatively, a consumer’s utility is maximized when the MU per amount spent on a product is equal to the MU per amount spent on any other product,
ORDINAL SCHOOL OF THOUGHT
Definition: The Ordinal Utility approach is based on the fact that the utility of a commodity cannot be measured in absolute quantity, but however, it will be possible for a consumer to tell subjectively whether the commodity derives more or less or equal satisfaction when compared to another.
The modern economists have discarded the concept of cardinal utility and instead applied ordinal utility approach to study the behavior of the consumers. While the neo-classical economists believed that the utility can be measured and expressed in cardinal numbers, but the modern economists maintain that the utility being the psychological phenomena cannot be measured theoretically, quantitatively and even cardinally.
The modern economist, Hicks, in particular, have applied the ordinal utility concept to study the consumer behavior. He introduced a tool of analysis called “Indifference Curve” to analyze the consumer behavior. An indifference curve refers to the locus of points each showing different combinations of two substitutes which yield the same level of satisfaction and utility to the consumer.
Assumptions of Ordinal Utility Approach
1) Rationality: It is assumed that the consumer is rational who aims at maximizing his level of satisfaction for given income and prices of goods and services, which he wish to consume. He is expected to take decisions consistent with this objective.
2) Ordinal Utility: The indifference curve assumes that the utility can only be expressed ordinally. This means the consumer can only tell his order of preference for the given goods and services.
3) Transitivity and Consistency of Choice: The consumer’s choice is expected to be either transitive or consistent. The transitivity of choice means, if the consumer prefers commodity X to Y and Y to Z, then he must prefer commodity X to Z. In other words, if X= Y, Y = Z, then he must treat X=Z. The consistency of choice means that if a consumer prefers commodity X to Y at one point of time, he will not prefer commodity Y to X in another period or even will not consider them as equal.
4) Nonsatiety: It is assumed that the consumer has not reached the saturation point of any commodity and hence, he prefers larger quantities of all commodities.
5) Diminishing Marginal Rate of Substitution (MRS): The marginal rate of substitution refers to the rate at which the consumer is ready to substitute one commodity (A) for another commodity (B) in such a way that his total satisfaction remains unchanged. The MRS is denoted as DB/DA. The ordinal approach assumes that DB/DA goes on diminishing if the consumer continues to substitute A for B.
3) Demand for and pricing of productive factors emphasizing on the labour market
The demand for labour shows how many workers the firms are willing and able to hire at a given time and wage rate.
Therefore, demand for labour is a concept that illustrates the amount of labour a firm is willing to employ at a particular wage rate. However, the determination of equilibrium in the labour market will also depend on the supply of labour.
Equilibrium in the labour market depends on the wage rate firms are willing to pay and the amount of labour willing to provide the necessary work.
3b) Pricing of productive factors on labour market
Factor pricing is associated with the prices that an entrepreneur pays to avail the services rendered by the factors of production. For example, an entrepreneur needs to pay wages to labor, rents for availing land, and interests for capital so that he/she can earn maximum profit. These factors of production directly affect the production process of an organization.
In context of an economy, these four factors of production when combined together produce a net aggregate of products, which is termed as national income. Therefore, it is important to determine the prices of these four factors of production. The theory of factor pricing deals with the determination of the share prices of four factors of production, namely land, labor, capital and enterprise.
In other words, the theory of factor pricing is concerned with the principles according to which the price of each factor of production is determined and distributed. Therefore, the theory of factor pricing is also known as theory of distribution. According to Chapman, the theory of distribution, “accounts for the sharing of the wealth produced by a community among the agents, or the owners of the agents, which have been active in its production.”
There are two aspects of each factor of production, which are as follows:
i. Price Aspect:
Refers to the aspect in which an organization pays a certain amount to avail the services of factors of production. For example, wages, rents, and interests constitute the price of factors of production.
ii. Income Aspect:
Refers to another aspect in which a certain amount is received by a factor of production. For instance, rents received by a landlord and wages received by labor constitute the income generated from the factors of production.
Generally, it is assumed that factor pricing theory is similar to product pricing theory. However, there are certain differences between the two theories. Both the theories assume the determination of prices by the interaction of two market forces, namely demand and supply.
However, there are differences in the nature of demand and supply of factors of production with respect to that of products. The demand for factors of production is derived demand, while demand for products is direct demand. Moreover, the demand for the factors of production is joint demand.
This is because a product cannot be produced using a single factor of production. On the other hand, the supply of products is closely related with the cost of production, whereas there is no cost of production for factors. For example, there is no cost of production for land, labor, and capital. Therefore, the factor pricing is separated from product pricing.

Name: Ibiam Nkemdilim Clara
Matric number:2021/241336

1: The Concept of Utility Theory Utility theory is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measure quantitative.

2: However, cardinal utility and ordinal utility are the two predominant theories of utility. The cardinal utility believes in measuring the satisfaction level in utils and the ordinal utility believes that the satisfaction level cannot be evaluated; however, it can be levelled.

3: According to the law of diminishing marginal returns, by definition, in most sectors, eventually the MPL will decrease. Based on this law: as units of one input are added (with all other inputs held constant) a point will be reached where the resulting additions to output will begin to decrease; that is marginal product will decline.

Another consideration is the marginal revenue product of labor (MRPL), which is the change in revenue that results from employing an additional unit of labor, holding all other inputs constant. This can be used to determine the optimal number of workers to employ at a given market wage rate. According to economic theory, profit-maximizing firms will hire workers up to the point where the marginal revenue product is equal to the wage rate because it is not efficient for a firm to pay its workers more than it will earn in revenues from their labor.

Common Reasons for a Shift in Labor Demand

Changes in the marginal productivity of labor, such as technological advances brought on by computersChanges in the prices of other factors of production, including shifts in the relative prices of labor and capital stockChanges in the price of an entity’s output, usually from an entity charging more for their product or service

Theory of utility is an economic that postulate the fact that consumers make purchase decision based in the degree of utility or satisfaction they obtain from or given to them. This means that the higher items will be prioritised in the consumer budget. utility theory also tries to explain the behaviour of an individual in an economy.
TYPES OF THEORY UTILITY
(1)time utility
(2) marginal utility
TIME UTILITY: this type of utility occurs when a company provides goods and services when a consumer demands or needs them
MARGINAL UTILITY: is the added satisfaction that a consumer gets from having one more unit of goods or services
(2) utility is the capacity of a commodity to satisfy human wants. thus it is said that want satisfying capacity of goods and services is called utility , in this ways utility is measured in terms of money and it is relative. The different between utility and usefulness is that a useful commodity may not here uniting of goods depends upon the intensity of wants
(3)demand simply means a consumer’s desire to buy goods and services without any hesitation and pay the price of it in simple words. As market demand increases, so does the price , when the demand decreases , price will go down as well
Pricing of productive factors/price factors: factor pricing is associated with the price that are entrepreneur pays to avoid the services rendered by the factors of production for example an entrepreneur needs to pay wages to labour, rent for availing land and interest for capital so that he/she can earn maximum profit

Utility Theory

Utility theory bases its beliefs upon individuals’ preferences. It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank order their choices depending upon their preferences. Each individual will show different preferences, which appear to be hard-wired within each individual. We can thus state that individuals’ preferences are intrinsic. Any theory, which proposes to capture preferences, is, by necessity, abstraction based on certain assumptions.

The utility is a psychological phenomenon; that implies the satisfying power of a good or service. It differs from person to person, as it depends on a person’s mental attitude. The measurability of utility is always a matter of contention.

Different views of utility according to the schools of thoughts are

*Cardinal utility and
*Ordinal utility.

Definition of Cardinal Utility:

The notion of Cardinal utility was formulated by Neo-classical economists, who hold that utility is measurable and can be expressed quantitatively or cardinally, i.e. 1, 2, 3, and so on. The traditional economists developed the theory of consumption based on cardinal measurement of utility, for which they coined the term ‘Util‘ expands to Units of utility. It is assumed that one util is equal to one unit of money, and there is the constant utility of money.

Further, it has been realised with the passage of time that the cardinal measurement of utility is not possible, thus less realistic. There are many difficulties in measuring utility numerically, as the utility derived by the consumer from a good or service depends on a number of factors such as mood, interest, taste, preferences and much more.

Definition of Ordinal Utility
Ordinal Utility is propounded by the modern economists, J.R. Hicks, and R.G.D. Allen, which states that it is not possible for consumers to express the satisfaction derived from a commodity in absolute or numerical terms. Modern Economists hold that utility being a psychological phenomenon, cannot be measured quantitatively, theoretically and conceptually. However, a person can introspectively express whether a good or service provides more, less or equal satisfaction when compared to one another.

In this way, the measurement of utility is ordinal, i.e. qualitative, based on the ranking of preferences for commodities. For example: Suppose a person prefers tea to coffee and coffee to milk. Hence, he or she can tell subjectively, his/her preferences, i.e. tea > coffee > milk.

As we said, the demand for labour shows how many workers an employer is willing and able to hire at a given wage rate at any given time.

3)The demand for and pricing of the productive factors on the labour market

The labour demand curve shows an inverse relationship between the employment level and the wage rate.
The factors that affect the labour demand curves are
* Labor productivity
* Changes in technology
* Changes in the number of firms
* Firm profitability, etc

If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This would shift the labour demand curve outwards.
This is because it would cost less for a firm to hire more workers to produce its output. Thus, the firm would hire more, thereby increasing employment.

Conversely, if the wage rate increases, employment levels would fall. This is because it would cost more for a firm to hire new workers to produce its output. Thus, the firm would hire less, thereby decreasing employment.

When wages are lower, labour becomes relatively cheaper than capital. We can say that when the wage rate starts decreasing, a substitution effect might occur (from capital to more labour) that would lead to more labour being employed.

NAME: UKWUEZE GINIKACHUKWU GLORY

REG NO: 2021/245864

FACULTY: SOCIAL SCIENCES

DEPARTMENT: PUBLIC ADMINISTRATION AND LOCAL GOVERNMENT(PALG)

1. Elementary theory of utility bases its beliefs upon individuals’ preferences. It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank order their choices depending upon their preferences. Each individual will show different preferences, which appear to be hard-wired within each individual. We can thus state that individuals’ preferences are intrinsic. Any theory, which proposes to capture preferences, is, by necessity, abstraction based on certain assumptions. Utility theory is a positive theory that seeks to explain the individuals’ observed behavior and choices.The distinction between normative and positive aspects of a theory is very important in the discipline of economics. Hence, it is the utmost satisfaction a consumer derives from a commodity.

2. The two schools of thought are;
i. Cardinal school of thought and
ii. Ordinal school of thought

CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.

ASSUMPTIONS OF CARDINAL APPROACH
i. Utility is measurable
ii. The consumer is rational
iii. There is diminishing marginal utility
iv. Total utility (TU) depends on the quantity consumed.
v. Money income of the consumer is held constant
ORDINAL SCHOOL OF THOUGHT: States that the satisfaction a consumer gets after consuming a good or service cannot be scaled in numbers, whereas, these things can be arranged in the order of preference. Two English economists, John Hicks and R.J. Allen 1930 argued that the consumer behavior theory should be introduced based on ordinal utility. According to the ordinal approach, utility is a psychological phenomenon like happiness, satisfaction, and welfare. The ordinal theory is highly subjective and differs across individuals. Therefore, it cannot be measured in quantifiable terms.

3. The four factors of production are land, physical capital, human capital, and entrepreneurship. The reward for land is rent, for capital is interest, for labor or human capital is wages, and for entrepreneurship is profit.
Growth in labour productivity is the key to higher living standards as a country can sustain real wage increases without losing competitiveness, only if labour productivity grows. Labour productivity relates output to the number of workers employed. It does not measure the specific contribution of labour alone.
If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This would shift the labour demand curve outwards.

Name: Ikechi Chinwendu faith
Reg no: 2021/241162
Dept: Public administration and local government
Faculty : Social Sciences
Level: 100lvl
Assignment on Eco 101

1. Briefly discuss the elementary theory of
utility:
Answer:

The elementary theory of utility is a theory that explains how consumers make choices among different goods and services based on the satisfaction or pleasure they derive from consuming them. According to this theory, consumers seek to maximize their total satisfaction or utility, subject to their budget constraints.

The theory assumes that consumers have a set of preferences for different goods and services, and that they can rank these preferences in terms of their satisfaction or utility. In other words, consumers can assign a value or utility to each good or service that they consume, and they can compare the value or utility of one good or service to another.

The theory also assumes that consumers have a limited budget or income, which they can use to purchase different goods and services. The budget constraint implies that consumers must make choices and trade-offs among different goods and services, since they cannot afford to buy everything they desire.

Finally, the theory assumes that consumers make rational choices based on their preferences and budget constraints. Rational choices mean that consumers choose the combination of goods and services that maximizes their total utility, given their budget constraint.

Overall, the elementary theory of utility provides a framework for understanding how consumers make choices among different goods and services based on their preferences and budget constraints. It is an important foundation for many models of consumer behavior in economics and marketing.

2. Mention and discuss the different views of utility according to the two schools of thought which you have been taught.
Answers :

There are two main schools of thought regarding the concept of utility in economics: the classical school and the neoclassical school. Each school has a different view of the nature and measurement of utility, as follows:

Classical school of thought:
The classical economists viewed utility as an objective and measurable property of goods and services. They believed that the value or utility of a good or service is determined by the amount of labor that went into its production. According to this view, the more labor that goes into producing a good or service, the greater its value or utility.
The classical economists also believed in the concept of diminishing marginal utility, which means that as a consumer consumes more of a particular good or service, the additional utility or satisfaction that he or she derives from each additional unit consumed diminishes. In other words, the first unit of a good or service consumed provides the most utility, and each subsequent unit provides less and less utility.

Neoclassical school of thought:
The neoclassical economists rejected the classical view of utility as an objective and measurable property of goods and services. They viewed utility as a subjective and personal experience that cannot be directly observed or measured. According to this view, consumers’ preferences and choices are based on their individual tastes, desires, and needs.
The neoclassical economists developed the concept of utility as a measure of consumer satisfaction or happiness. They believed that consumers make choices based on the expected level of satisfaction or utility that they will derive from consuming different goods and services. The neoclassical economists also developed the concept of total utility and marginal utility, which are used to measure the satisfaction or utility that a consumer derives from consuming a particular good or service.

Overall, the classical school of thought viewed utility as an objective and measurable property of goods and services, while the neoclassical school viewed utility as a subjective and personal experience that cannot be directly observed or measured. Both views have influenced the development of economic theory and models of consumer behavior.

3. Explain the demand for and pricing of productive factors emphasizing on the labor market.
Answers:

The demand for and pricing of productive factors, including labor, is determined by the interaction of supply and demand in the market. In the labor market, the demand for labor is derived from the demand for the goods and services that labor produces. The pricing of labor is determined by the interaction of the supply of and demand for labor.

Demand for labor:
The demand for labor is derived from the demand for the goods and services that labor produces. As the demand for goods and services increases, firms require more labor to produce those goods and services. The demand for labor is also affected by the productivity of labor, which refers to the amount of output that a given amount of labor can produce. Firms are willing to pay higher wages for more productive workers, as they can produce more output per hour of work.

Pricing of labor:
The pricing of labor is determined by the interaction of the supply of and demand for labor. The supply of labor is determined by the number of people who are willing and able to work at a given wage rate. The demand for labor, as mentioned earlier, is derived from the demand for the goods and services that labor produces.

When the supply of labor exceeds the demand for labor, there is a surplus of labor, which puts downward pressure on wages. Conversely, when the demand for labor exceeds the supply of labor, there is a shortage of labor, which puts upward pressure on wages. The market wage rate is the wage rate at which the quantity of labor demanded equals the quantity of labor supplied.

Factors affecting labor demand and pricing:
Several factors can affect the demand for and pricing of labor. These include changes in technology, which can increase or decrease the productivity of labor; changes in the demand for goods and services; changes in the supply of labor, which can be affected by demographic factors such as population growth and changes in immigration policies; and changes in government policies, such as minimum wage laws, labor regulations, and tax policies.

Overall, the demand for and pricing of labor is determined by the interaction of supply and demand in the labor market. Firms demand labor based on the productivity of labor and the demand for goods and services. The pricing of labor is determined by the interaction of the supply of and demand for labor, and is influenced by a variety of factors, including changes in technology, demographics, and government policies.

NAME: UKWUEZE GINIKACHUKWU GLORY

REG NO: 2021/245864

FACULTY: SOCIAL SCIENCES

DEPARTMENT: PUBLIC ADMINISTRATION AND LOCAL GOVERNMENT(PALG)

1. Elementary theory of utility bases its beliefs upon individuals’ preferences. It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank order their choices depending upon their preferences. Each individual will show different preferences, which appear to be hard-wired within each individual. We can thus state that individuals’ preferences are intrinsic. Any theory, which proposes to capture preferences, is, by necessity, abstraction based on certain assumptions. Utility theory is a positive theory that seeks to explain the individuals’ observed behavior and choices.The distinction between normative and positive aspects of a theory is very important in the discipline of economics. Hence, it is the utmost satisfaction a consumer derives from a commodity.

2. The two schools of thought are;
i. Cardinal school of thought and
ii. Ordinal school of thought

CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.

ASSUMPTIONS OF CARDINAL APPROACH
i. Utility is measurable
ii. The consumer is rational
iii. There is diminishing marginal utility
iv. Total utility (TU) depends on the quantity consumed.
v. Money income of the consumer is held constant
ORDINAL SCHOOL OF THOUGHT: States that the satisfaction a consumer gets after consuming a good or service cannot be scaled in numbers, whereas, these things can be arranged in the order of preference. Two English economists, John Hicks and R.J. Allen 1930 argued that the consumer behavior theory should be introduced based on ordinal utility. According to the ordinal approach, utility is a psychological phenomenon like happiness, satisfaction, and welfare. The ordinal theory is highly subjective and differs across individuals. Therefore, it cannot be measured in quantifiable terms.

3. The four factors of production are land, physical capital, human capital, and entrepreneurship. The reward for land is rent, for capital is interest, for labor or human capital is wages, and for entrepreneurship is profit.
Growth in labour productivity is the key to higher living standards as a country can sustain real wage increases without losing competitiveness, only if labour productivity grows. Labour productivity relates output to the number of workers employed. It does not measure the specific contribution of labour alone.
If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This would shift the labour demand curve outwards.

NAME: UKWUEZE GINIKACHUKWU GLORY

REG NO: 2021/245864

FACULTY: SOCIAL SCIENCES

DEPARTMENT: PUBLIC ADMINISTRATION AND LOCAL GOVERNMENT(PALG)

1. Elementary theory of utility bases its beliefs upon individuals’ preferences. It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank order their choices depending upon their preferences. Each individual will show different preferences, which appear to be hard-wired within each individual. We can thus state that individuals’ preferences are intrinsic. Any theory, which proposes to capture preferences, is, by necessity, abstraction based on certain assumptions. Utility theory is a positive theory that seeks to explain the individuals’ observed behavior and choices.The distinction between normative and positive aspects of a theory is very important in the discipline of economics. Hence, it is the utmost satisfaction a consumer derives from a commodity.

2. The two schools of thought are;
i. Cardinal school of thought and
ii. Ordinal school of thought

CARDINAL SCHOOL OF THOUGHT: This approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.

ASSUMPTIONS OF CARDINAL APPROACH
i. Utility is measurable
ii. The consumer is rational
iii. There is diminishing marginal utility
iv. Total utility (TU) depends on the quantity consumed.
v. Money income of the consumer is held constant
ORDINAL SCHOOL OF THOUGHT: States that the satisfaction a consumer gets after consuming a good or service cannot be scaled in numbers, whereas, these things can be arranged in the order of preference. Two English economists, John Hicks and R.J. Allen 1930 argued that the consumer behavior theory should be introduced based on ordinal utility. According to the ordinal approach, utility is a psychological phenomenon like happiness, satisfaction, and welfare. The ordinal theory is highly subjective and differs across individuals. Therefore, it cannot be measured in quantifiable terms.

3. The four factors of production are land, physical capital, human capital, and entrepreneurship. The reward for land is rent, for capital is interest, for labor or human capital is wages, and for entrepreneurship is profit.
Growth in labour productivity is the key to higher living standards as a country can sustain real wage increases without losing competitiveness, only if labour productivity grows. Labour productivity relates output to the number of workers employed. It does not measure the specific contribution of labour alone.
If labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This would shift the labour demand curve outwards.

Name: Ejeh Adaeze
Reg N.o: 2019/250269
Email: adaezeejeh017@gmail.com
Blog Address: https://adaezeejeh.blogspot.com/

1. Utility means the ability of goods and services to satisfy unlimited human wants. it can also be defined as the satisfaction,pleasure or fulfilment an individual derives from the Consumption of goods and services. Goods are described because of their ability to satisfy human wants. The Concept of Utility is used to express consumer’s tastes and preferences. The analysis of consumer tastes and preferences is a crucial step in determining how a consumer maximizes satisfaction in spending income. Thus, when a consumer derives satisfaction from consuming goods or services,it can be said that the goods or services consumed or utilised possess Utility, which is relative to the consumer depending on time,place,form and possession.

2a.The Cardinal school of thought
b. The Ordinal school of thought.
2a. The Cardinal school of thought; This school of thought emphasises that Utility is measurable, this means that the quantity of goods and services that satisfies the need of a consumer can be evaluated through the use of figures ranging from Zero to infinity. There are five assumptions of the Cardinal school of thought
1.Total Utility(TU) depends on the quantity of goods or services.
2.Money income of the consumer is held constant
3.There is diminishing marginal Utility (MU)
4.The Consumer is Rational
5. Utility is measurable
Note: There assumptions are derived from the concepts of total Utility, average utility and marginal utility.
Concept of Total Utility; total Utility is the total amount of satisfaction a consumer derives from the consumption of a particular commodity at a point in time.
Concept of Average Utility; This is the amount of satisfaction a consumer derives from the consumption of a unit of a commodity. it is derived by dividing the total amount of Utility,derived by the total number of commodities consumed by the customer.
Concept of Marginal Utility; This is the additional satisfaction a consumer a consumer derives from the consumption of an additional unit of a particular commodity,at a particular point in time. it is the change in the total Utility as a result of the consumption of additional unit of a commodity.

2b.The Ordinal school of thought; The Ordinal approach of Utility requires that consumers make a scale of preference, by choosing between the various commodities that gives one the same level of satisfaction. This approach assumes that Utility can be ranked at various levels of consumption. This approach makes use of an indifference curve( a curve that indicates the levels of satisfaction attained by a consumer from the consumption of two commodities). A Combination of indifference curves is known as an indifference map.

3. The Demand for a factor is not a direct demand but an indirect or derived demand. The demand for labour for example,is not demand for labour himself but infact, demand for goods and services which the labour produces. Thus, in labour market, it means where wages and salaries of labourers are Negotiated. The forces of demand and supply determines the wages and salaries a labourer will be paid. in the senes that when the demand of that labour is so high, then the wages or salaries of a labourer will also increase(the wages there means the price) Demand for labour is a derived demand. this basically means that the forces of demand and supply plays a role in the labour market, where human beings are used in order to carry out production, so this also means that when the demand for labour is low compared to “supply”, the wages or salaries(prize) will also decrease.

Elementary theory of utility is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measure quantitative. it is a theory postulated in economics to explain the behavior of individual based on the premise people can consistently rank order their choices depending on their preference. Each person has different choices which are set, not changing overtime.
CARDINAL SCHOOL OF THOUGHT _ This approach empathize that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity. It assumes that marginal utilty decreases or diminishes with extra unit of consumption known as law of diminishing marginal utility. It is an idea that economic welfare can be directly observable and be given a value.
ORDINAL SCHOOL OF THOUGHT_ It states that the utility or satisfaction cannot be measured in exact numbers but can only be ranked or put into order. This approach argues that utility is completely a psychological element and it cannot be expressed in cardinal number. Utility cannot be measured in cardinal numbers in ordinal utility theory. ordinality means that utility can be ranked.

Labour market is a market where wages and salaries are negotiated. when producing goods and services, businesses require labour and capital as inputs to their productive process. The demand for labour is an economic principle derived from the demand and for a firm’s output. That’s is, if demand for a firm’s output increases, the firm will demand for more labour, this hiring more staff. And if demand for the firm’s output of goods and services decreases, it will then require less labour and its demand will fall.
Those seeking employment will supply their labour in exchange for wages. Businesses demanding labour from workers will pay for their time and skills. The demand for labour is a derived demand that’s demand for something you want to produce and you need labourers who will produce it and that’s why it’s called productive factors. Human being is a productive factors and human being is needed for the production of goods and services.

Elementary theory of utility is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measure quantitative. it is a theory postulated in economics to explain the behavior of individual based on the premise people can consistently rank order their choices depending on their preference. Each person has different choices which are set, not changing overtime.
CARDINAL SCHOOL OF THOUGHT _ This approach empathize that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity. It assumes that marginal utilty decreases or diminishes with extra unit of consumption. It is an idea that economic welfare can be directly observable and be given a value.
ORDINAL SCHOOL OF THOUGHT_ It states that the utility or satisfaction cannot be measured in exact numbers but can only be ranked or put into order. This approach argues that utility is completely a psychological element and it cannot be expressed in cardinal number. ordinality means that utility can be ranked.

Labour market is a market where wages and salaries are negotiated. when producing goods and services, businesses require labour and capital as inputs to their productive process. The demand for labour is an economic principle derived from the demand and for a firm’s output. That’s is, if demand for a firm’s output increases, the firm will demand for more labour, this hiring more staff. And if demand for the firm’s output of goods and services decreases, it will then require less labour and its demand will fall.
Those seeking employment will supply their labour in exchange for wages. Businesses demanding labour from workers will pay for their time and skills. The demand for labour is a derived demand that’s demand for something you want to produce and you need labourers who will produce it and that’s why it’s called productive factors. Human being is a productive factors and human being is needed for the production of goods and services.

1)

A. What does utility mean in economics? Utility theory in economics pertains to the value or worth of a certain good, service, or item. It suggests that goods, services, and items can be ranked according to their usefulness. it was founded by a swiss mathematician named Daniel Bernoulli, in the 18th century. Bernoulli founded the idea with regard to the differing values of things. With respect to theory, the utility of an item tends to be closely correlated to its price. An item such as gold, which is very useful and thus has great utility (combined with its scarcity), is very expensive.
1. Total utility is closely tied to the bare concept of utility, Total utility points to the aggregate amount of usefulness and fruition there is to be gained from the use of a specific good, service, or other item.
2.The abstract measurement of utility is another key concept of the theory. Although it’s hard to calculate the exact utility of something, economists use abstract measurements to capture the usefulness of things.
*The four basic assumptions of utility theory
1) That a customer can rank any number of given options.
2) More total utility is always better than less.
3) A mix of goods is better than a set of one good.
4)Customers are rational decision makers.
* There are also different types of utility, such as:
* -Form Utility – Worth of the good or service based on the combined resources it took to create the good or service
* -Time Utility – The utility that is found in offering a good or service to consumers at the right time
* -Place Utility – Refers to offering a good or service in the right place for consumers’ easy accessibility
* -Possession Utility – The satisfaction a consumer gains from owning a certain product/good.

B.) The two school of thoughts under Utility can be divided into two
1. Cardinal Utility
2. Ordinal Utility
CARDINAL UTILITY.
Cardinal utility is a quantitative approach to measuring utility. It presents the utility of something as a fixed number it’s an exact measure of utility. An individual can rank goods or services according to their cardinal utility by comparing the utility numbers derived from the goods or services.
ORDINAL UTILITY.
Ordinal utility is a relative measure of utility. It describes how one can determine the value of a good or service by comparing it to another. This measurement only captures which good or service is better, not how much better it is. Customers might assign value to goods or services according to ordinal utility. For example, a man asks his friend which one of two local barbershops is better. His friend tells him barber B is better because his skills are more refined. This is a relative measure as one can’t quantitatively measure how much better the one barber cuts hair compared to the other.

C.) Utility plays a big role in economics with respect to supply and demand. The law of diminishing marginal utility refers to how the utility gained from a certain good or service decreases as consumption increases. The more sodas you drink the less satisfaction you gain from drinking Soda.
The more an individual consumes, the less the need.

1. In economics, utility is a term used to determine the worth or value of a good or service. More specifically, utility is the total satisfaction or benefit derived from consuming a good or service. Economic theories based on rational choice usually assume that consumers will strive to maximize their utility.

ORDINAL UTILITY
Early economists of the Spanish Scholastic tradition of the 1300s and 1400s described the economic value of goods as deriving directly from this property of usefulness and based their theories on prices and monetary exchanges. It also starts that utility can be ranked

CARDINAL UTILITY
To Bernoulli and other economists, utility is modeled as a quantifiable or cardinal property of the economic goods that a person consumes.
To help with this quantitative measurement of satisfaction, economists assume a unit known as a “util” to represent the amount of psychological satisfaction a specific good or service generates for a subset of people in various situations. However, it separates the theory of economic utility from actual observation and experience, since “utils” cannot actually be observed, measured, or compared between different economic goods or between individuals.

3. When producing goods and services, businesses require labor and capital as inputs to their production process. The demand for labor is an economics principle derived from the demand for a firm’s output. That is, if demand for a firm’s output increases, the firm will demand more labor, thus hiring more staff. And if demand for the firm’s output of goods and services decreases, in turn, it will require less labor and its demand for labor will fall, and less staff will be retained.

Labor market factors drive the supply and demand for labor. Those seeking employment will supply their labor in exchange for wages. Businesses demanding labor from workers will pay for their time and skills.

Name:Akachukwu Kosisochukwu John
Email:bishopkosiso@gmail.com
Mat no:2021/244040
Dept:Economics

1. Theory of Utility: Utility may be defined as the ability of a commodity or service to satisfy consumers wants. Therefore when a consumer derives satisfaction from the consumption of any commodity or service, it can be said that commodity or service possesses utility. In other words, any commodity or service that possesses utility is useful to the consumer that used it. As a result of the fact that usefulness is a relative term, therefore, what may be useful to one person may not be to another. Utility therefore, is relative to a consumer depending on the time, place, form, nd possession etc. A commodity that can satisfy a consumer’s want at a particular points in time and place may not satisfy another’s want.Utility then depends on the form of the commodity, individual’s time and place.

2
a. Cardinal school of thoughts: The approach emphasizes that utility is measurable. That is after consuming a given quantity of a commodity the consumer can aim or calculate his satisfaction through the use of figures which range from 0 to infinity. Some economists who belong to this school of thought argue that utility can be measured subjectively in units called “Utils”. The assumptions of the cardinal approach are;
I. Utility is measurable
ii. The consumer is rational.
iii. There is diminishing marginal utility.
iv. Total utility (TU) depends on the quantity consumed.
v. Money income of the consumer is held constant.

b. Ordinal school of thoughts: Economist who belong to this school argue that it is not possible to measure utility (satisfaction). They opine that although utility cannot be precisely measured, it is possible for a consumer to make a choice between various bundles of commodities by ranking them according to the level of satisfaction expected from each bundle without specifying exact units of utility. The ordinal approach is based on the following assumptions:
I. Total utility is determined by the quantities of commodities consumed.
ii. Rationality of the consumer. He is rational because he considers the implications of his economics choices.
iii. Utility order. The consumer can rank is preferences based on expected level of satisfaction.
iv. Preferences of consumers can be ranked in terms of indifference curves which cannot the marginal rate of substitution of commodities.
v. Consistency and transitivity of choice. The consumer is consistent in his choice and preference of one commodity over another.

3. Explain the demand for and pricing of productive factors emphasizing on the labour market.
Ans: Labour market like other goods market in the economy are governed by the forces of demand and supply. The supply and demand for labour determine the wage or price paid for labour services. Like all prices, the price of labour (the wage) depends on supply and demand. The demand curve reflects the value of marginal product of labour. Therefore in equilibrium, workers receive the value of their marginal contribution to the production of goods and services.

NAME: ANYIAM MARYJANE CHIAMAKA
REG NO: 2021/243498
DEPARTMENT: NURSING SCIENCE.

1. ELEMENTARY THEORY OF UTILITY
Utility is the ability of goods or services to satisfy human wants. It is the satisfaction or pleasure a consumer derives from the use of a commodity. The concept of utility is used to express a consumer’s taste and preference; however, utility itself is difficult to measure.
Although utility cannot be measured directly, it can be measured by means of consumer theories, which assume that a consumer will strive to attain maximum utility using his limited resources. When a consumer derives satisfaction from the use of goods or services, the goods or services possess a utility, which is relative to that consumer.
Utility is classified into four types;
1. Time Utility: The quicker a product or service can be purchased and used at that time, the higher its perceived utility. Time utility is always high in times of scarcity. For example, the time utility of a bottle of cold water is higher in hot weather than it is in cold weather
2. Form Utility: The transformation ability of goods and services to suit the needs of a consumer gives it added value. Some goods have no utility until they are transformed into a form that can be utilized by the consumer. An example is flour, which does not give direct satisfaction but must be in form of bread, cake e.t.c for the consumer to derive satisfaction
3. Place Utility: This is the ability of goods and services to satisfy a need within a location. The more accessible a product or service is within a location, the higher its place utility. A bookshop offers no satisfaction on a construction site but has utility in a school
4. Possession utility: This is the satisfaction derived from the ownership of goods and services. The more benefits obtained from owning goods and services, the higher its possession utility. A man who owns a car obtains more satisfaction than if he borrows a car

2. CARDINAL AND ORDINAL SCHOOLS OF THOUGHTS
A. The Cardinal School of Thought:
This school of thought emphasizes that utility is measurable i.e that the quantity of goods and services that satisfy a consumer can be measured using numbers from zero to infinity
Assumptions of Cardinal Utility
i. Utility is measurable.
ii. The consumer is rational.
iii. There is diminishing marginal utility.
iv. Total utility (TU) depends on the quantity consumed.
v. Money income of the consumer is held constant.

B. The Ordinal School of Thought:
The ordinal approach to consumer utility states that utility cannot be scaled in numbers but can only be ranked. It requires that consumers make arrange various commodities that give the same satisfaction level in order of preference. This approach makes use of an indifference curve.
Indifference Curve
An indifference curve indicates the satisfaction levels obtained from consuming two commodities. A combination of indifference curves is an indifference map.
Assumptions of Ordinal Utility
i. Utility can only be expressed ordinally.
ii. The consumer is rational.
iii. The consumer’s choice must be transitive or consistent.
iv. The consumer has not reached the saturation point of any commodity.
v. The marginal rate of substitution is diminishing.

3. LABOUR MARKETS
Demand for the factors of production is derived demand. Their demand arises from the demand for goods or services that factor produces. In the case of labour, it is derived from the demand for a product or a service that labour produces.
The forces of demand and supply govern labour markets like other goods markets. The demand and supply of labour will determine the wages or price paid for labour services. An increase in demand for a commodity leads to an increase in the quantity of labour. For example, suppose there is an increase in the price of corn, which makes its production more profitable because an increase in the price of corn leads to an increase in the value of the marginal product of labour. That is, with a higher price, the added output from an extra worker is more valuable than before. Farmers will seek to increase production in order to take advantage of the price increase, in doing so they will hire more workers.
On a demand curve that shows the relationship between demand and wages, an increase in demand leads to an increase in wages and a decrease in demand leads to a decrease in wages

utility is the satisfaction that a consumer derives from consuming a commodity at any particular time. utility is measured in utils
There are types of utility.
1) place utility is the satisfaction derived from consuming a commodity due to its geographical location.
2) Time utility is the satisfaction derived from a commodity during the time needed.
3) form utility is the satisfaction derived from a commodity when it has been turned from its original state to another form through manufacturing.

2) concept of utility can be analysed by the following school of thought
a) cardinal School of thought so that utility can be measured using numbers from 0 to infinity
b) ordinal school of thought says that utility can only be ranked

3) if labour productivity increases firms will demand more labour at each wage rates and the firm’s demand for labour itself will increase

NAME: OKECHUKWU CLETUS CHIBUEZE
REG. NO: 2021/246805
DEPT.: ECONOMICS
COURSE: ECO 101
DATE: 10/03/2023

1. BRIEFLY DISCUSS THE ELEMENTARY THEORY OF UTILITY: in economics, utility theory tries to explain the behaviour of individuals consumer in an economy.
Utility theory state that each person given a list of options, can rank those options in a precise order of preference. each person has different choice which are set, not changing over time
2. MENTION AND DISCUSS THE DIFFERENT VIEW OF UTILITY ACCORDING TO THE TWO SCHOOLS OF THOUGHT WHICH YOU HAVE BEEN TAUGHT:
a. Cardinal utility school of thought: it states that the level of satisfaction a consumer acquires after consuming any good and services can be measurable and expressed in quantitative number
b. Ordinal school of thought: ordinal school of thought States that the level of satisfaction a consumer obtains after consuming various commodity cannot be measured in numbers but can be arranged in the order of preference
3. EXPLAIN THE DEMAND FOR PRICING OF PRODUCTIVE FACTORS EMPHASIZING ON THE LABOUR MARKET:
a. Demand for labour: the demand for labour is an economis principle derived from the demand for firm’s output. That is , it demand for a firm’s output increase the firm, will demand more labour,thus hiring more staff
b. Pricing of labour: cost of labour is the amount paid by an employer to benefits, plus related payroll taxes and benefits labour cost is an important value that finance an accounting professional calculate to determine the direct and indirect price that a company pays for labour

1.Briefly discuss the elementary theory for utility
Utility can be defined as the amount of satisfaction derived from the consumption or use of goods and services. Utility theory bases its belief upon individual preference. It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank order their choices depending upon their preference. Utility theory is a positive theory that seeks to explain the individuals observed behavior and choices. The distinction between normative and positive aspects of a theory is very important in the discipline of economics. Some people argue that economic theory is very important in the discipline of economics. Assumptions of utility theory; completeness, monotonicity, rationality
2. Mention and discuss the different views of utility according to the two schools of thoughts which you have been taught.
Answer
I. Cardinal utility: it explains that satisfaction level after consuming any goods or services can be scaled in terms of countable numbers. This means that utility are measured based on utility. This theory was applied by PROF ALFRED MARSHALL
ii. Ordinal utility: it explains that the satisfaction level after consuming any goods or services cannot be scaled in numbers. However these things can be arranged in the order of preference. This theory was applied by PROF JOHN R. HICKS
3.Explain the demand for and pricing of productive factors emphasizing on the labour market
Answer
Demand for labor have demand and supply curves, just like markets for goods. The law of demand applies in labor markets this way: A higher salary or wage—that is, a higher price in the labor market—leads to a decrease in the quantity of labor demanded by employers, while a lower salary or wage leads to an increase in the quantity of labor demanded. The law of supply functions in labor markets, too: A higher price for labor leads to a higher quantity of labor supplied; a lower price leads to a lower quantity supplied.

Name : Ugwu Anthonia chinazaekpere
Reg. No: 2021 /243015
Email :ugwuanthoniachy22@gmail. Com
QUESTION ONE
Elementary theory of utility
Utility can be defined as the ability of goods and services to satisfy unlimited human wants. It can also be defined as the satisfaction, pleasure or fulfillment an individual derives from the consumption of a particular goods and services. Therefore, when a consumer derives satisfaction from the consumption of any commodity or services, it can be said that the commodity or services possesses utility. In other words, any commodity or services that possesses utility is useful to the consumer that used it. As a result of the fact that usefulness is a relative term, therefore, what may be useful to one person may not be to another. This goes a long way to justifying the saying that “one man’s meat is another man’s poison “The concept of utility is used to express consumer’s taste and preferences.
The analysis of consumer’s taste and preferences is a crucial step in Determining how a consumer maximizes utility in spending income. The utility of individual is hard to measure but how ever it can be determined indirectly from the consumer behavior as consumer tends to satisfy his or her want by dividing his limited resources between the various goods and services that gives him satisfaction.
Utility therefore, is relative to a consumer, depending on time, place, form etc. A commodity that can satisfy a consumers want at a particular point in time and place may not satisfy another’s want. Utility then depends on Individuals time and place and the form of the commodity.
QUESTION TWO
Different views of utility according to the two schools of thought :
The Cardinal School Of Thought :
This school of thought emphasizes that utility is measurable. This means that after consuming a given quantity of a commodity, the consumer can simply evaluate his satisfaction through the use of figures which ranges from zero to infinity.
The cardinal school of thought assumes that ;
Utility is measurable
The consumer is rational
There is diminishing marginal utility.
Total Utility (TU) depends on the quantity consumed.
Money income of the consumer is held constant.
2. The Ordinal School Of Thought:
This school of thought emphasizes that utility is ordinal which means that utility could be ranked at the various levels of consumption. It requires that consumer should make a scale of preference and choose between the various commodities that gives him thesame level of satisfaction. The ordinal approach is usually analyzed using indifference curve which indicates the level at which consumer strains the highest level(s) of satisfaction from the consumption of two or more commodities that gives him thesame level of satisfaction.
Question Three
The demand for and pricing of productive factor emphasizing on labour:
Labor market like other goods market in the economy is governed by the factors of Demand and supply . The supply and demand for labour determine the wage or price paid for labour services. Like all price, the price of labor (wage) depends on supply and demand. The demand curve reflects the value of the marginal product of labour. At equilibrium, workers receive the value of their marginal contribution to the production of goods and services.

Achiben Chizaram Paschaline
2021/243605
Medical Labouratory Science
achibenzaram@gmail.com

No1. BRIEFLY DISCUSS THE ELEMENTARY THEORY OF UTILITY
An economic good yields utility to the extent to which its useful for satisfying a consumers want or need. The theory of utility in economics refers to the value or worth of a certain good, service or item. It suggests that goods, services and items can be ranked according to how useful they are as stated by the Swiss Mathematician Daniel Bernoulli in the 18th century. Utility theory is a related theory ie consumers make decisions based on the satisfaction they expect to recieve from (thier preference) an action even when outcomes are uncertain. for example gold is very useful, has scarcity and a great utility and so is very expensive. The utility here is correlated to the price of gold.

No2. MENTION AND DISCUSS THE DIFFERENT VIEWS OF UTILITY ACCORDING TO THE TWO SCHOOLS OF THOUGHT WHICH YOU HAVE BEEN TAUGHT
The two schools of thought are the Cardnal Utility and the Ordinal utility.
Cardinal school of thought emphasizes that utility is measurable ie after consuming a given quantity of the commodity, the consumer can simply evaluate his satisfaction through the use of figures usually from zero to infinity (prof. Marshalls theory). This school of thought is applied to a single commodity where the utility of a single commodity is treated independent of other commodities. Example; fried rice gives chioma 60 utils of satisfaction, whereas jellof rice gives her only 40 utils. here her utility is measured based on the utils.
Ordinal school of thought/utility explains that the level of satisfaction after consumption of goods and services cannot be scaled in numbers, however it can be organised in an order of preference (prof JR Hicks theory). Example; chioma gets more satisfaction from fried rice compared to that of jellof rice. Utility here is based on satisfaction.

NO3. EXPLAIN THE DEMAND FOR AND PRICING OF PRODUCTIVE FACTORS EMPHASIZING ON LABOUR MARKET
Demand for labour is defined as the amount of labour firms/employers seek to hire during a given time period at a particular wage rate. The demand for labour as a productive factor is derived demand ie it is demanded not for its own sake but for its contribution to the labour market. An increase in labour productivity leads to an increase in the demand for labour by firms at each wage rate.
Pricing of productive factors in the labour market is associated with prices that an entrepreneur pays to avail the services rendered by the different factors of production. for example in the labour market an entrepreneur needs to pay wages to labour, rent for land , and interests for capital so that maximum profit can be earned.

NEBOH ODINAKACHUKWU MARIA
ECONOMICS DEPARTMENT
2021/241342
nebohmaria22@gmail.com
1.ELEMENTARY THEORY UTILITY
Utility is a term used to describe the pleasure or satisfaction a consumer receives from consuming a good or service .OR. The satisfaction you derive from consuming a particular product .
Types of utility.
a. Time utility – Is the satisfaction one derives from consuming a particular product at a particular time. Example – The utility of smoking Indian hemp and drinking of beer is the satisfaction one derives from consuming such a commodity at a particular time .
b. Place utility – Is the process of making goods or services available in locations that allow consumers to easily access products and service.
c. Form utility – Is the transformation of goods in order to derive satisfaction from it. Examples – Flour to cake, bread etc.
d. Possession utility – Is the value a consumer derives from owning a specific product and being able to use it as soon as possible. Example – the possession of a new car.

2.THE TWO SCHOOLS OF THOUGHT Are.
CARDINAL AND ORDINAL SCHOOL OF THOUGHT.
a. Cardinal school of thought means that the satisfaction we derive from consuming goods or services can be measured numerically. The unit of this form of measurement is known as a ‘util’. To achieve cardinal measurement of goods utility is to look at the prices individuals are willing to pay for those goods. For example – Pizza gives Odinaka 60 utils of satisfaction, whereas burger gives her only 40 utils .
b. Ordinal school of thought means the satisfaction level after consuming any goods or services cannot be scaled in numbers. However, these things can be arranged in the order of preference. Example – Odinaka gets more satisfaction from a pizza as compared to that of a burger .

3. THE DEMAND FOR AND PRICING OF PRODUCTIVE FACTOR EMPHASIZING ON THE LABOUR MARKET.
We can say that labour market refers to the supply of and demand for labour, in which employees provide the supply and employers provide the demand.
The demand for labour is derived demand, that is labour is not demanded for its own sake, but for what it can produce. For r instance, if the demand for a good decreases, the demand for the workers producing that good will also decrease. And if the demand for a good increases, there will also be an increased demand for the workers producing that good.
Pricing of labour – Factor pricing is associated with the prices that an entrepreneur pays to avail the derives rendered by the factors of production. Example – an entrepreneur needs to pay wage to labour, rents for availing land and interest for capital so that he/she can earn maximum profit.

1.Utility is the amount of satisfaction that a consumer derives from the consumption of goods and services at a particular time.
Utility theory is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measure quantitative.

2.Cardinal school of thought and Ordinal school of thought.
a.Cardinal school of thought:This emphasizes that utility is measurable using Utils.That is after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.
b.Ordinal school of thought explains that the satisfaction level after consuming any goods or services cannot be scaled in numbers,however,these things can be arranged in the order of preference.

3.The demand for labor is an economics principle derived from the demand for a firm’s output.That is,if demand for a firm’s output increases,the firm will demand more labor,thus hiring more staff and if demand for the firm’s output of goods and services decreases,in turn,it will require less labor and its demand for labor will fall and less staff will be retained.

1) The Elementary theory of utility.

The Elementary theory of utility bases its beliefs upon individuals’ preferences.
It is a theory postulated in economics to explain behavior of individuals based on the premise people can consistently rank order their choices depending upon their preferences. Each individual will show different preferences, which appear to be hard-wired within each individual. We can thus state that individuals’ preferences are intrinsic.
Any theory, which proposes to capture preferences, is, by necessity, abstraction based on certain assumptions.
Utility theory is a positive theory that seeks to explain the individuals’ observed behavior and choices.
Therefore , Utility is the satisfaction an individual derives from consumption of a commodity at a particular time, place or form.There are four basic principles that fall under this umbrella, including form utility, time utility, place utility, and possession utility.

2) The different views of utility according to the two schools of thoughts :

Cardinal and Ordinal schools of thought are the two predominant schools of thought on utility.

A. CARDINAL SCHOOL OF THOUGHT:
The Cardinal approach emphasizes that utility is measurable. That is, after consuming a given quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity.
The cardinal utility believes in measuring the satisfaction level in utils (an arbitrary measure of units of utility).

B. ORDINAL SCHOOL OF THOUGHT:
Ordinal approach to consumer’s utility states that the utility/satisfaction cannot be measured in exact numbers but can only be ranked or put into order. This approach argues that utility/satisfaction is completely a psychological element and it cannot be expressed in cardinal numbers.
ordinal utility believes that the satisfaction level cannot be evaluated; however, it can be levelled.

3) The demand for and pricing of productive factors emphasizing on the labour market.

The demand for a factor of production, which is derived from the demand for the goods and services it is used to produce. The value to a firm of hiring one more unit of a factor of production, which equals price of a unit of output multiplied by the marginal product of the factor of production.
The demand for labour shows how many workers the firms are willing and able to hire at a given time and wage rate. Therefore, demand for labour is a concept that illustrates the amount of labour a firm is willing to employ at a particular wage rate.
The demand for labour is called a derived demand because the demand for labor comes from the demand for goods produced by labour.
The demand for labour is an economics principle derived from the demand for a firm’s output. That is, if demand for a firm’s output increases, the firm will demand more labour, thus hiring more staff.
According to the modem theory, the price of a factor of production is determined at a point where the demand and supply curves of the factor intersect each other. This point is known as equilibrium point, where the demand of a factor is equal to its supply.
The pricing of labour is the total expenditure incurred by employers for the employment of employees. They represent a cost of salaried that is; the sum of all wages paid to employees, as well as the cost of employee benefits and payroll taxes paid by an employer. The cost of labor is broken into direct and indirect (overhead) costs.

1) BRIEFLY DISCUSS THE ELEMENTARY THEORY OF UTILITY.
(a) CONCEPT OF UTILITY THEORY: In economics, utility theory tries to explain the behavior of individual consumers in an economy. Utility theory argues that each person, given a list of options, can rank those options in a precise order of preference. Each person has different choices which are set, not changing over time.
(b) WHAT IS UTILITY?
Utility refers to the comprehensive benefits obtained from consuming an item or service. Consumers would typically aim to maximise their utility based on rational choice based on economic models. To comprehend the monetary value of an item or service is crucial because it directly impacts demand, and hence pricing, for that service or product. It is impossible to assess and quantify a consumer’s utility in practice.
(c) WHAT IS TOTAL UTILITY:
Total utility is the aggregate amount of satisfaction or fulfillment that a consumer receives through the consumption of a specific good or service. Total utility is often compared to marginal utility, which is the satisfaction a consumer receives from consuming one additional unit of a good or service.
(d) MARGINAL UTILITY:
Marginal utility refers to the additional benefit derived from consuming one more unit of a specific good or service. Consuming units can result in positive, negative, or zero marginal utility. Utility is not constant, and for every additional unit consumed, often the consumer experiences what economists refer to as the diminishing marginal utility, where each additional unit adds less and less marginal utility.
(e) LAW OF DEMINISHING MARGINAL UTILITY:
The law of diminishing marginal utility states that all else equal, as consumption increases, the marginal utility derived from each additional unit declines. Marginal utility is the incremental increase in utility that results from the consumption of one additional unit.
(f) UTILITY MAXIMIZATION AND DERIVATION OF DEMANDS CURVE:
Utility maximization refers to the concept that an individual gets a high level of satisfaction with the purchase of the good. When utility is maximized, there is no incentive to alter the expenditure unless there is a change in taste, income, or price. In other words, the marginal utility spent per dollar on each product or commodity is equalized. That is, consumers compare the extra utility from each production with the cost.

The algebraic statement of this utility-maximizing rule is that the consumer will allocate income in a way that satisfies their needs.

Consumer allocates their income so that the last unit spend on each product yields the same amount of extra utility.

Demand curve
The demand curve is a visual representation of how many goods are bought at each possible price. It is used to model the price-quantity relationship. The price is plotted on the vertical axis, and the quantity demanded on the vertical axis. In general, we said that the demand curve is a downward-sloping curve; this is because of the law of demand. The law of demand states an inverse relationship between price and quantity demanded of a commodity if other things remain the same.
(g) DERIVATION OF DEMAND CURVE FROM
UTILITY THEORY:
Diminishing marginal utility is the basis of the demand curve.

The normal demand curve slopes downwards from left to right, showing that at a lower price, more of a commodity will be demanded and also at a higher price, less of i will be demanded.

The explanation for phenomenon lies in the law of diminishing marginal utility. According to this law, successive equal increments of a commodity will yield less and less satisfaction to the consumer.

At the beginning, when the consumer has very little of the commodity, his marginal utility is very his Therefore, he is ready to pay a high price obtain it. Thus, the higher the price, the lower the quantity demanded.

However, as the consumer gets more and more of a commodity his marginal utility begins to fall and at this point the price must be reduced. Thus, the lower t price, the higher the quantity demanded.

2) MENTION AND DISCUSS THE DIFFERENT VIEWS OF UTILITY ACCORDING TO THE TWO SCHOOLS OF THOUGHTS WHICH YOU HAVE BEEN TAUGHT.

(a) CARDINAL UTILITY THEORY
(b) ORDINAL UTILITY THEORY

CARDINAL UTILITY THEORY: The cardinal utility states that the level of satisfaction a consumer acquires after consuming any goods and services can be measurable and expressed in quantitative numbers. It explains that the satisfaction level after consuming any goods or services can be scaled in terms of countable numbers. example Pizza gives Sam 60 utils of satisfaction, whereas burger gives him only 40 utils.
ORDINAL UTILITY THEORY: The ordinal utility approach is a school of thought that believes that utility cannot be measured quantitatively, that is, utility is not additive rather it could only be ranked according to preference. The consumer must be able to determine the order of preference when faced with different bundles of goods by ranking the various ‘baskets of goods’ according to the satisfaction that each bundle gives. For instance, if a consumer derives 3utils from the consumption of one unit of commodity X and 12 utils from the consumption of commodity Y, this means that the consumer derives more satisfaction from consuming commodity Y than from commodity X. Though to the cardinals, the consumer derives four times more utility from one unit of Y than from X.

3) EXPLAIN THE DEMAND FOR AND PRICING OF PRODUCTIVE FACTORS EMPHASIZING ON THE LABOUR MARKET.
Economists use the term demand to refer to the amount of some good or service consumers are willing and able to purchase at each price. Demand is based on needs and wants—a consumer may be able to differentiate between a need and a want, but from an economist’s perspective they are the same thing. Demand is also based on ability to pay. If you cannot pay for it, you have no effective demand.

What a buyer pays for a unit of the specific good or service is called price. The total number of units purchased at that price is called the quantity demanded. A rise in price of a good or service almost always decreases the quantity demanded of that good or service. Conversely, a fall in price will increase the quantity demanded. When the price of a gallon of gasoline goes up, for example, people look for ways to reduce their consumption by combining several errands, commuting by carpool or mass transit, or taking weekend or vacation trips closer to home. Economists call this inverse relationship between price and quantity demanded the law of demand. The law of demand assumes that all other variables that affect demand (to be explained in the next module) are held constant.

Factors of Production are economic goods: scarce means used to achieve an individual’s ends. They are land, labor and capital. Each is examined. Incomes are earned by factor owners as production takes place. There is no separated production and distribution.

Consumer goods and producer goods are subjectively determined by how they are used.

Factor pricing is by the Austrian theory of imputation.

Name: Okeke Ruth Ngozi
Reg No: 2021/244119
Course Code: Eco 101
Department: Economics
Faculty: Social Sciences

1. The theory of Utility is: The benefits or satisfaction which a person gets from the consumption of a good or service is called ” Utility”. Goods are desired because of their ability to satisfy human wants. The concept of utility is expressed when a consumer’s taste and preferences are satisfied. Utility simply means the satisfaction a consumer derives from consuming a particular product or commodity at a particular time.
There are four major types of Utility such as;
( a) Time utility
( b) place utility
( c) Possession utility
(d) Form Utility

(a) Time utility: This is when a good is accessible to customers whenever they need them. This is the satisfaction derived from consuming a commodity at a particular time.
( b) Place utility: This can be defined as a satisfaction you derive from how easily it is to obtained a particular commodity or product.
(c) Possession utility: The satisfaction a consumer gains from owning a certain product or good.
(d) Form Utility: This is simply the combined resources it took to create the good or service.
The Concept of Utility include:
Utility theory is based on the fact that satisfaction which consumers derived from consumption of goods and services can be measure quantitative;
(i) Totally utility:This is the total amount of satisfaction a consumer derives from the consumption of several quantities of a commodity.
(ii) Average utility: Is the consumption of per unit of a commodity at a particular time.
( iii) Marginal utility: This is the additional satisfaction derived from a commodity.
Utility Maximisation or Equilibrium:
This simply means the point where consumer derives maximum satisfaction.When he or her marginal utility is equal to the price of a commodity; Utility Maximazation is the attainment of the greatest possible total utility.
2. The Different views of of Utility according to two School of Thought are:
1. Cardinal School of Thought
2. Ordinal School of Thought

1. Cardinal School of Thought: This is the approach that emphasizes that utility is measurable, that is, after consuming a giving quantity of a commodity the consumer can simply evaluate his satisfaction through the use of figures which range from zero to infinity and can be measured in ” utiles”. Cardinal utility gives a value of utility to different options that enables consumers to rank the magnitude of how much the prefer one goods to another. Cardinal utility is the utility where the satisfaction derived by consuming a product can be expressed numerically.
Assumptions of Cardinal School of Thought are as follows:
* utility can be measurable
* concept of diminishing marginal utility
* It assumes that consumers are rational
* It assumes that income is held constant
* That total utility depends on the goods and services.
2. Ordinal School of Thought: This states that the utility/ satisfaction cannot be measured in exact numbers but can only be ranked or put in order. This approach argues that utility/ satisfaction is completely a psychological element and it cannot be expressed in cardinal numbers. This measurement only captures which good or service is better, not how much better it is, by giving giving the magnitude of how much a consumer prefers a good.
Assumptions of Ordinal School of Thought:
* Ordinal measurement: The utility is measured ordinary by comparing the satisfaction whether higher or lower by consuming different goods.
* Consistency: As per this assumption the consumer remains consistent in choice, if there are two goods to prefer over.
* Non_ satiety: The consumer always prefer more over less if there is a choice available to him. It means the consumer has not reached to point of saturation incase of any commodity.

3. The demand for and Pricing of productive factors emphasizing on the labour market is:
Demand for Labour is an economic principle derived from the demand for a firm’s output. That is if demand for a firm’s output increases, the firm will demand more labour, thus hiring more staff
The factors that affect the demand for labour are;
* Labour productivity
* Changes in Technology
* Changes in the Number of Firm’s
*Changes in demand for a firm’s product
* Firm Profitability

* Labour Productivity: If the labour productivity increases, firms will demand more labour at each wage rate and the firm’s demand for labour itself will increase. This will shift the labour demand curve outward.
* Changes in Technology: Changes in technology can cause the demand for labour to increase and decrease depending on the situation.
* Changes in the number of Firm’s: Changes in the number of firm’s operating in the industry can be an immense effect on the overall labour market.
* Changes in demand for a product that labour produces: If there is an increase in demand for new vehicles, we would likely see an increase in demand for raw materials used in vehicle production. This will lead to increase in demand for workers, as firms will need people to manufacture the vehicles.
* Profitability of Firm’s: If a firm’s profitability increases,bit will be able to hire more workers. This will lead to increase in the demand for labour
* The Marginal Productivity theory of demand for Labour: The marginal productivity theory of demand for labour states that firms or employers will workers for a particular type until the contribution made by the marginal worker is equal to the cost incurred in hiring new workers
* The Marginal Productivity theory of demand for labour states that firms or employers will hire workers of a particular type until the contribution made by the marginal worker is equal to the cost incurred by having hired this new worker.

Labour in demand :
Making output and pricing decisions, firms must also determine how much of each input to demand. Firms may choose to demand many different kinds of inputs. The two most common are labour and capital. The demand for labour is determined in the labour market. The participants in the labour market are workers and firms. Workers supply labour to firms in exchange for wages. The firm’s demand for labour is an output. If demand for the firm’s output increases, the firm will demand more labour and will hire more workers. If demand for the firm’s output falls, the firm will demand less labour and will reduce it’s work force.
Marginal revenue Product of Labour: When the firm knows the level of demand for its output, it determines how much labour to demand by looking at the marginal revenue Product of labour is the additional revenue the firm earns by employing one more unit of labour.

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NUMBER 1:- The elementary theory of utility is a theory in economics that explains how individuals make choices between different goods and services based on their preferences. It assumes that individuals have rational preferences and seek to maximize their satisfaction or “utility” from consuming goods and services.

According to this theory, individuals allocate their limited resources (such as income) to maximize their utility. Utility is a measure of satisfaction or happiness that an individual derives from consuming a good or service. The theory assumes that individuals can rank their preferences for different goods and services and make choices that maximize their overall utility.

The theory also assumes that individuals experience diminishing marginal utility, meaning that the more they consume of a particular good or service, the less additional satisfaction they receive from each additional unit consumed. As a result, individuals will allocate their resources in a way that maximizes their total utility, considering both the total amount of each good consumed and the marginal utility derived from consuming additional units.

Overall, the elementary theory of utility provides a basic framework for understanding how individuals make choices and allocate resources based on their preferences and the satisfaction they derive from consuming goods and services.
NUMBER 2:- Classical/Orthodox School:
According to the classical/orthodox school, utility is seen as a subjective and unmeasurable concept. In other words, they believe that it is not possible to measure utility in any objective way. Therefore, the classical/orthodox school does not use the concept of utility in their economic analysis.
Instead, this school focuses on the concept of value, which they define in terms of the labor that goes into producing a good or service. In this view, the value of a good is determined by the amount of labor that goes into producing it, and this value determines its price. Therefore, the classical/orthodox school believes that the price of a good or service is a more important factor in economic analysis than its utility.

Neoclassical School:
The neoclassical school, on the other hand, sees utility as a measurable and quantifiable concept. They believe that utility can be measured by observing individuals’ behavior in the market, such as their willingness to pay for a good or service. In this view, utility is a crucial concept in economic analysis because it helps to explain why individuals make certain choices.
The neoclassical school also assumes that individuals make rational choices to maximize their utility. They assume that individuals have a set of preferences that they use to make decisions, and they allocate their resources in a way that maximizes their overall satisfaction or utility.

In conclusion, the classical/orthodox school does not use the concept of utility in economic analysis, while the neoclassical school sees it as a crucial concept that helps explain individual behavior in the market. The neoclassical school also assumes that individuals make rational choices to maximize their utility, while the classical/orthodox school focuses more on the concept of value in determining the price of goods and services.
NUMBER 3:- The demand for and pricing of productive factors, including labor, is a key aspect of microeconomics. The demand for labor refers to the quantity of labor that firms are willing to hire at different wage rates, while the pricing of labor refers to the determination of wages in the labor market.

In general, the demand for labor is derived from the demand for the goods and services that labor is used to produce. As firms produce more goods and services, they require more labor to do so. The demand for labor is also affected by the productivity of labor, which is determined by factors such as technology, capital equipment, and the skills of the labor force.

The pricing of labor is determined by the intersection of the demand and supply of labor in the labor market. If the demand for labor exceeds the supply, firms will be willing to pay higher wages to attract workers. Conversely, if the supply of labor exceeds the demand, wages will tend to be lower. In addition, factors such as the availability of substitute inputs (such as capital or automation) and government policies (such as minimum wage laws) can also affect the pricing of labor.

It is important to note that the demand for labor can also be affected by non-price factors, such as changes in the level of economic activity, shifts in consumer preferences, and changes in technology. For example, if there is a shift towards more online shopping, this may increase the demand for workers in the e-commerce industry, while reducing the demand for workers in traditional retail stores.

Overall, the demand for and pricing of labor in the labor market is influenced by a range of economic, social, and political factors. By understanding these factors, economists and policymakers can better analyze and manage the labor market to achieve desired economic outcomes such as full employment and higher standards of living for workers.