transformation of a utility function represents the same preference, hence the spacing between indifference curves does not have any significance. Explain why in the theory of producer, the production function and the corresponding isoquant is a cardinal property, that is, the
transformation of a utility function represents the same preference, hence the spacing between indifference curves does not have any significance. Explain why in the theory of producer, the production function and the corresponding isoquant is a cardinal property, that is, the
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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In the theory of consumer, we argued that the utility is ordinal, that is, utility number does not have any intrinsic meaning other than to give a preference ordering among consumption bundles. In other words, any increasing monotone
transformation of a utility function represents the same preference, hence the
spacing between indifference
Explain why in the theory of producer, the production function and the
corresponding isoquant is a cardinal property, that is, the number itself has an
intrinsic meaning. And explain the relationship between returns to scale and space between isoquants.
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