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It is the term used to study active buyers’ behavior. It refers to the number of certain goods that a buyer is willing to invest, in comparison to, others, in conditions, when both the options are equally satisfying.
The calculation of the utility function tells how a person’s units of a utility depend on the goods available. The rate is calculated by getting the indifference curve where you study if the consumer will be happy substituting one product for others.
Such a study can be made as a part of marketing or growth strategy, where you try to interpret commodity substitution bias or you try to compare markets.
One should know that most of the indifference curves are slopes that keep changing from time to time. Sometimes, the curve is convex where the buyer moves to new merchandise and maybe buying more of both.
If the rate increases, the graph will be represented as a concave. Sometimes, the rate graph is concave that indicates, the user consumes more of the first product with the growth in the consumption of second or vice verse. Sometimes, the rate diminishes – where he/she chooses to substitute.
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