GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Utility theory is not able to explain the reason for
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Giffen goods
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Normal goods
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Inferior goods
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Precious product
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Explanation:
Detailed explanation-1: -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.
Detailed explanation-2: -Utility theory is based on this assumption of rationality and describes all decision outcomes (financial and otherwise) in terms of the utility (or value) placed on them by individuals. Within this framework, decisions can be understood in terms of rationally ordered levels of utility attached to different outcomes.
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