#### keys

Maple Springs, ECON 1000
Excerpt: ... LECTURE 5 : consumer choice key terms : budget line relative prices real income marginal utility principle of diminishing marginal utility indifference curve marginal rate of substitution ...

#### Econ 4010 Lecture 2

USC, ECON 4010
Excerpt: ... <Lecture 2> 3. Consumer Behavior: Maximizing Utility Budget Line slope of the budget line An increase in consumer income A decrease in consumer income A decrease of price of food An increase in price of food - A change in price of clothing indifference curvesbudget lines Maximizing Utility the slope of the indifference curveslope of the budget line MRSratio of the price Corner Solutions Maximizing Utility control variables Marginal Utility Diminishing Marginal Utility ...

#### lesson06

UNL, ECON 212
Excerpt: ... lesson06 Page 1 of 2 Unit 2 > Lesson 6 Consumer Behavior and Utility Maximization Introduction Consumer behavior is an essential component of microeconomics. Remember in Chapter 1, we said microeconomics was concerned with the trees in the forest and not the overall forest. How consumers react to price changes, with limited income helps explain the law of demand. Chapter 8 discusses consumer utility (satisfaction), marginal utility, the law of diminishing marginal utility , and the maximizing utility rule. All of these are important in determining the behavior of consumers. Objectives At the end of this lesson you should be able to: define and distinguish between the income and substitution effects of a price change. explain why a consumer will buy more of a commodity when its price falls by using the income and substitution effects. explain why a consumer will buy less of a commodity when its price rises by using the income and substitution effects. define marginal utility and state the law of diminishing ...

#### 1-16-09

Allegheny, ECON 200
Excerpt: ... Microeconomics Class Notes 1/16/09 CALCULUS Review We will be working on a lot of Calculus first. We use calculus to validate our hypotheses and/or theories we can see the implications of the theory and if they are true or not. Utility (from money) Variable x is the amount of money The function Uis utility. U(x) The utility from money. As x increases, U increases. Curve 1 is what we expect: As X increases, U increases at a decreasing rate. The first dollar that we get is worth more to us than the billionth dollar. This is called the diminishing marginal utility for money. (The change in utility) / (change in X) = the marginal utility. How much extra utility do I receive from consuming an extra \$ The second derivate = derivative of the first derivative (1st derivative). EXAMPLE: Two different payment schemes: Payment Scheme Payment A Payment B Pay \$100 50% of \$200 50% of \$0 We prefer payment scheme A instead of payment scheme B because B is riskier. The Expecte ...

#### LN03

Minnesota, PIET 0120
Excerpt: ... Lecture 3 Market Demand Things that affect demand in macroeconomics: Assumptions about consumers 1. 2. 3. Utility: Rational: The Law of Diminishing Marginal Utility : Example: (Slices of pizza) Law of Demand: Page 1 of 4 Lecture 3, 1102 Spring 2009 Market Supply Assumptions about firms 1. 2. 3. Examples of Resources: Law of Supply: Production Possibilities Frontier (PPF) Goods Plan A Plan B Plan C Plan D Plan E Page 2 of 4 Lecture 3, 1102 Spring 2009 Assumptions about data: 1. 2. 3. Page 3 of 4 Lecture 3, 1102 Spring 2009 Opportunity Cost: Law of Increasing Opportunity Costs: Goods Plan A Plan B Plan C Plan D Plan E Page 4 of 4 Lecture 3, 1102 Spring 2009 ...

#### JAN 23

Berkeley, LS 107
Excerpt: ... ribution probably reward need Diminishing marginal utility ...

#### ps1

UVA, JRH 5
Excerpt: ... ty of wealth will not accept a bet on a fair coin. Briefly explain why a person whose preferences violate the law of diminishing marginal utility may accept a bet on a fair coin. (A complete answer to this question should require no more than two to three sentences. You may wish to use a graph to illustrate your answer.) ...

#### Exam 1 Jan 2008 Answers

Toledo, MIME 2600
Excerpt: ... MIME 2600 Engineering Economics Name: _ Midterm Exam 1 (100 Points) January 30, 2007 Select the best answer from choices A through D for each question. (2.5 points each) 1. The creation of a price floor for a product above the equilibrium price will generally cause a(n) (a) Market Shortage. (c) Market Failure. (b) Market Surplus. (d) Scarcity. 2. The "invisible hand" that conveys the desired outputs to suppliers based on market prices and sales is referred to as the _. (a) Mixed Economy. (c) Market Mechanism. (b) Supply Curve. (d) Demand Curve. 3. The assumption that allows for the analysis of individual market variables while assuming nothing else changes is _. (a) Laissez Faire. (c) Law of Diminishing Marginal Utility . (b) Say's Law . (d) Ceteris Paribus. 4. The policy of non-intervention by the government known as _ is the preferred role of government by classical economics. (a) Laissez Faire. (c) Law of Diminishing Marginal Utility . (b) Say's Law . ...

#### 3

Berkeley, ECON 001
Excerpt: ... is the satisfaction, or reward, a product yields relative to its alternatives. The basis of choice. Marginal utility is the additional satisfaction gained by the consumption or use of one more unit of something. Example: Utility from five slices of pizza versus marginal utility from fifth slice of pizza. 07/02/07 Economics 1 Lecture 3 07/02/07 Economics 1 Lecture 3 Diminishing Marginal Utility The law of diminishing marginal utility : The more of one good consumed in a given period, the less satisfaction (utility) generated by consuming each additional (marginal) unit of the same good. Diminishing Marginal Utility Total Utility and Marginal Utility of Trips to the Club Per Week TRIPS TO CLUB TOTAL UTILITY MARGINAL UTILITY 1 2 3 4 5 6 12 22 28 32 34 34 12 10 6 4 2 0 Total utility increases at a decreasing rate, while marginal utility decreases. 07/02/07 Economics 1 Lecture 3 07/02/07 Economics 1 Lecture 3 Diminishing Marginal Utility and Downward-Sloping Dema ...

#### handout9

Middlebury, EC 155
Excerpt: ... Introductory Microeconomics EC155A and B Lecture 15: The Logic of Individual Choice Ah, the pastry! On satisfaction Satisfaction - pleasure of something - is the central aspect of human behavior that economists study. As mentioned before, others aspects are important: as studied in anthropology, psychology, and sociology. As self-interested people, we pursue and try to attain the maximum possible satisfaction Utility the satisfaction one gets from consuming a good or a service Introductory Microeconomics EC155A and B Lecture 15: The Logic of Individual Choice Measures of utility The principle of diminishing marginal utility : after some point, the marginal utility received from each additional unit of a good decreases with each additional unit consumed. Introductory Microeconomics EC155A and B Lecture 15: The Logic of Individual Choice Rational choice and marginal utility The basic principle of marginal choice: spend your money on those goods that ...

#### M_ch4

Fayetteville State University, ECO 2000

#### Econ.2010.02

Utah, ECON 2010
Excerpt: ... ooks less than before 2 "The budget line tells us what combinations of purchases are possible, but it doesn't tell us how the consumer will decide which combination to consume. To get to this, we must add the theory of utility." 3.2 Utility - Utility: the pleasure or satisfaction from goods, services, or events. Mainstream economics "assumed or at least hoped that the utility obtained from consuming goods and services could be measured numerically, much as weight is measured in kilograms or length in meters." 3.3 Marginal Thinking in Consumer Decision Making "utility function (or total utility curve): a curve showing the relation of utility levels to consumption levels" "Marginal utility is simply the utility gained from the last unit of a good or services that is consumed." "Consumers are assumed to experience diminishing marginal utility as they increase consumption of any one good." "The first chocolate bar that Quong consumes gives him 9 utils. He's hungry, and it tastes really good. The secon ...

#### Chapter_7

USC, ECON 203
Excerpt: ... Chapter 7) Consumer Behavior and Utility Maximization Law of Diminishing Marginal Utility Law of diminishing marginal utility added satisfaction declines as a consumer acquires additional units of a given product. In a specific span of time over which consumers tastes remain unchanged, consumers can obtain as much of a particular good or service as they can afford. The more of that product they obtain, the less they want still more of it. Terminology Utility: want-satisfying power The utility of a good or service is the satisfaction or pleasure one gets from consuming it. Utility and usefulness are not synonymous (Painting) Utility is subjective. The utility of a specific product may vary from person to person. Utility is difficult to quantify. We assume that people can measure satisfaction with units called utils. Total Utility and Marginal Utility Total Utility: the total amount of satisfaction or pleasure a person derives from consuming some specific q ...

#### lecture 3

Arizona, AREC 514
Excerpt: ... Measuring Costs and Benefits Measuring Benefits and Costs (See Chap 4): Consumers' Willingness to Pay (WTP) Consumer Surplus (CS) Producers' Surplus (PS) Social Surplus (SS) Review discussion of Fig. 4.2; 4.3 Measuring Benefits in Secondary Markets (See Chap 5) Measuring Benefits Utility Utility Theory Assumption: Diminishing Marginal Utility Quantity Consumed Measuring Benefits Diminishing marginal utility What evidence do we have that individuals' utilities have this property? "Revealed preferences" At lower prices, people consume more. As prices increase, the amount people consume decreases Measuring Benefits Price P0 X0 Individual Demand Curve P1 Q0 X1 Q1 D Quantity Consumed Measuring Benefits Demand curve shows actual expenditure behaviors of individuals When goods are scarce, people willing to pay high price When goods are abundant (people are already consuming a lot), people willing to pay only a lower price Measured in monetary terms Note: Consumers' exp ...

#### lecture 3

Arizona, AREC 514
Excerpt: ... Measuring Costs and Benefits Measuring Benefits and Costs (See Chap 4): Consumers' Willingness to Pay (WTP) Consumer Surplus (CS) Producers' Surplus (PS) Social Surplus (SS) Review discussion of Fig. 4.2; 4.3 Measuring Benefits in Secondary Markets (See Chap 5) Measuring Benefits Utility Utility Theory Assumption: Diminishing Marginal Utility Quantity Consumed Measuring Benefits Diminishing marginal utility What evidence do we have that individuals' utilities have this property? "Revealed preferences" At lower prices, people consume more. As prices increase, the amount people consume decreases Measuring Benefits Price P0 X0 Individual Demand Curve P1 Q0 X1 Q1 D Quantity Consumed Measuring Benefits Demand curve shows actual expenditure behaviors of individuals When goods are scarce, people willing to pay high price When goods are abundant (people are already consuming a lot), people willing to pay only a lower price Measured in monetary terms Note: Consumers' exp ...

#### x100705_LeTrent

UNC, ECON 434
Excerpt: ... ding Marshall's partial price analysis, Schumpeter's theory of the entrepreneur, and basic graphs of supply and demand. Hermann Heinrich von Gossen (1810 1858) "Gossen's First Law" idea of diminishing marginal utility . "Gossen's Second Law" the exchange ratio of goods is equal to the ratio of marginal utilities of the traders. "Gossen's Third Law" a good has value only when the demand for it exceeds supply. Major Work: The Development of the Laws of Exchange among Men and of the Consequent Rules of Human Action, 1854. William Stanley Jevons (1835 1882) assisted Menger and Walras in launching the Marginalist Revolution that would eventually lead to the birth of neoclassical economics. Jevons promoted the concept that logical problems can be resolved exactly like equations in algebra by making the statements symbolic and then substituting elements with similar properties. Outlined the principle of diminishing marginal utility and related it to the equimarginal principle. Also introduced the di ...

#### PE3-F04

Texas A&M, AGEC 105
Excerpt: ... AGEC 105 Quick Quiz 3 Name_ UIN_ Write the correct letter in the blank space. There are questions on the back of this page! _1. Consumer equilibrium exists a. Where the ratio of marginal utility to price is the same for all goods b. Where diminishing marginal utility reaches zero. c. Where the budget constraint line is minimum d. Where the marginal rate of substitution is highest _2. At all points along an indifference curve, an individual is a. Realizing a constant amount of utility. b. Minimizing cost. c. Spending the same amount of money. d. None of the above. _3. A parallel shift downward of the budget constraint line results from: a. A decrease in one of the prices. b. An increase in income. c. A decrease in income. d. An increase in total utility _4. When used in economic literature, ceteris paribus means a. All except one thing will change. b. All else equal. c. All else is changing proportionately d. Economic variables change const ...

#### Faber_byParker

George Mason, DPARKER 3
Excerpt: ... Summary of Economic and Ecological concepts for valuing ecosystem services, Farber et al. (2002) April 7, 2004 Economics of Human/Environment Interactions, Lecture 12 Dawn Parker, George Mason University 1 Definitions: Value systems: the normative and moral frameworks people use to assign importance and necessity to their beliefs and actions also imply practical objectives and actions. Value: the contribution of an action or object to user specified goals, objectives, or conditions Valuation: the process of expressing a value for a particular action or object Economics of Human/Environment Interactions, Lecture 12 Dawn Parker, George Mason University 2 Economic concept of value Based on the marginalist paradigm and the concept of diminishing marginal utility Assumes that marginal utilities of different goods are balanced Implies that one good can be traded off for another to increase utility Also implies that value can be measured in terms of mone ...

#### Study_Guide_2

Excerpt: ... sub.=inelastic 3) Fraction of Income large fraction=elastic; small fraction=inelastic 4) Time Elapse short-term =elastic; long-term=inelastic ii. Three Elasticity Cases Graphs Perfectly elastic Perfectly inelastic Straight Line Demand Curve Equations Relationship to Total Revenue Study Guide 2, Economics 200, 2 II. Law of Demand a. Define: -Individual Self-Interest - everyone looks out for themselves -Law of Demand If price raises quantity demanded goes down -Income Effect the higher your income the more you can buy -Substitution Effect lots of substitutes make the price go down -Utility - satisfaction - Total Utility complete satisfaction - Marginal Utility extra satisfaction form consuming an extra unit -Law of Diminishing Marginal Utility too much of something isn't good b. Define and Graph: -Indifference Curve (including slope) -Indifference Map -Budget Line (including slope, and effects of income and price changes) c. 3 Conditions for a Successful Illustration d. 1st Illustr ...

#### Chapter 3 Key

NMSU, ECON 371
Excerpt: ... Chapter 3 Homework Key 1. Consider the utility function U ( x , y ) Due: February 20, 2007 y x with MU x y / 2 x and MU y x. a. Does the consumer believe more is better for each good? Explain. Since U increases whenever x or y increases, more of each good is better. This is also confirmed by noting that MUx and MUy are both positive for any positive values of x and y . b. Do the consumer's preferences exhibit a diminishing marginal utility of x? Explain. Is the marginal utility of y diminishing? Explain. Since MU x y 2 x , as x increases (holding y constant), MU x falls. Therefore the marginal utility of x is diminishing. However, MU y x . As y increases, MUy does not change. Therefore the preferences exhibit a constant, not diminishing, marginal utility of y. 2. The utility that Julie receives by consuming food F and clothing C is given by U ( F ,C ) For this utility function, the marginal utilities are MU F FC . C and MU C F. a. On a graph with F on the horizontal ...

#### EC201-Chp9

, ECONOMICS 201
Excerpt: ... EC201- Chapter 9 Terms Utility- Enjoyment or satisfaction people receive from consuming goods and services (unit: utils) Marginal Utility (MU)- The change in total utility a person receives from consuming one additional unit of a good or service Law of Diminishing Marginal Utility - The principle that consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time Two Conditions for Maximizing Utility MUobject1 Pobject1 = MUobject2 Pobject2 Spending on object1 + Spending on Object2 = Amount of available to be spent Network Externality- The situation where the usefulness of a product increases with the number of consumers who use it Behavioral economics- The study of situations in which people make choices that do not appear to be economically rational Consumers take into account monetary costs but ignore nonmonetary opportunity costs Failure to ignore sunk costs Overly optimistic about their fu ...

#### e201topics

UVA, JRH 5
Excerpt: ... Study Guide for the Final Exam Economics 201, Sections 4 & 6 Reading List Chapter 4 Chapter 6 Chapter 19 Chapter 21 Chapter 23 (pp. 508 513, 520 525) Chapter 25 Special Topic 14 Chapter 5 Chapter 17 (pp. 373 385) Chapter 20 Chapter 22 Chapter 24 Special Topic 12 Topics for the Final Exam Theory of the Consumer o Diminishing marginal utility o Marginal utility per dollar and utility maximization o Demand curves Theory of the Firm o Cost curves o Profit-maximization o Demand for inputs Perfect Competition o Equilibrium o Short-run vs. long-run Monopoly o Marginal revenue for a monopolist o Profit-maximization for a monopolist o Social welfare under monopoly Government intervention in markets o Surplus (consumer, producer, total) o The effects of taxes, subsidies, price controls, tariffs, etc. on competitive and monopolistic markets Rent seeking o Incentives of consumers and firms o Regulatory capture Decision making under uncertainty o Marginal utility of wealth and attitudes towards risk o Expected va ...

#### midterm2 review topics

Wisconsin, ECON 101
Textbook: Principles of Macroeconomics
Excerpt: ... Review Topics for Midterm 2 Econ 101, Lecture 4, Spring 2007 Professor Korinna K. Hansen Budget constraint Opportunity set Slope of the budget constraint Shifts and rotations of the budget constraint Total utility and marginal utility The law of diminishing marginal utility Indifference curve Marginal rate of Substitution Properties of indifference curves Consumer equilibrium Deriving the demand curve for a good Deriving the Engel curve for a good Substitution effect and income effect Production Product curves: TP, AP, MP Increasing returns to labor Diminishing returns to labor Negative returns to labor Perfect competition Revenue curves: TR, AR, MR Cost curves: TC, TVC, TFC, AC, MC, AVC, AFC Changes in fixed costs Changes in variable costs Short run versus long run Profit maximization for the competitive firm Short run equilibrium for the perfectly competitive firm Profits or losses for the competitive firm The short run supply for the competitive firm The shut down point for the competitive firm The l ...

#### Chapter10

Midwestern State University, ECONS 101
Excerpt: ... 3/1/2009 WHAT YOU WILL LEARN IN THIS CHAPTER chapter: 10 > The Rational Consumer Krugman/Wells Economics 2009 Worth Publishers 1 of 1 WHAT YOU WILL LEARN IN THIS CHAPTER How consumers choose to spend their income on goods and services Why consumers make choices by maximizing utility, a measure of satisfaction from consumption Why the principle of diminishing marginal utility applies to the consumption of most goods and services How to use marginal analysis to find the optimal consumption bundle What income and substitution effects are 2 of 2 Opportunity Cost and Decisions The utility of a consumer is a measure of the satisfaction the consumer derives from consumption of goods and services. An individual s consumption bundle is the collection of individual's all the goods and services consumed by that individual. An individual's utility function gives the total utility generated by his or her consumption bundle. The unit of utility is a util. 3 of 34 1 3/1/2009 Cassie's Total Utility and Marginal ...