Page 155 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes properties of juiciness ratio are given in Table 1. Again lets suppose that customer uses only brand B,
because there are equal units of sweetness and juiciness, so it maximizes its uses on point Y of ray OB.
When its neutral curve I touches as shown in Fig. 7.11.
1
Now suppose a producer produces a new brand C of apples in which properties of juiciness is more
than sweetness. It is shown by line OC in this figure. Price of this brand is less in comparison of other
brands. Customer on this assumption changes its value from brand B to C by which the budget line XYZ
of line OC goes up to XYZ. Now customer on point Z maximizes its use where higher neutral curve I
2
touches.

Fig. 7.11

A B
Sweetness R D I 3

Y C I
2
X I 1 Z

O
Juiciness

Now we take such conditions in which a producer introduces a new brand in the market in which more
units of both properties are there and offers consumer a high standard. This shows object line OD in
Fig. 7.11. It moves above to XYRZ and consumer goes on high consumer curve I , where it touches point
3
R. Now consumer maximizes its utility by using more units of both specialities of only this brand, while
it has given its income and price of the brand.

Critical Appraisal of Lancaster’s Demand Theory

In comparison of analysis of neutral curve and appeared value, theory of Marshal’s demand theory,
new demand theory of Lancaster’s is better in following ways:
1. Earlier theory describes only demand of consumer of a simple commodity but Lancaster’s demand
theory is better than these theories because these commodities or its brand give more preferences
to its speciality. A consumer buys a commodity not only for buying but buys so that it has some
properties which give utility to him.
2. Lancaster’s speciality theory is betterment of other theories of behaviour of consumer because it
explains this fact content that consumer not only buys a single object but buys a bundle of mix group
of objects which have different properties. It is more realistic because for e.g., consumer uses not
only one vegetable but buys different vegetables which have different speciality.
3. Demand theory of classical and new classical do not give answer of this question that is why consumer
gives more value to an object of a special brand in respect of others. According to Lancaster’s theory,
it is so that a special brand has more specialities in respect of others, which maximizes the utilities
of the commodity.

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