1-28-08 - Chapter 3 Theory of Consumer Behavior Utility...

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Unformatted text preview: 1-28-08 Chapter 3 Theory of Consumer Behavior Utility functions o An algebraic expression that allows us to rank consumption bundles or combinations of goods Total Utility = Qhamburgers x Qpizza o This approach assumes that utility is cardinally measurable in the same sense that a ruler measures difference Marginal Utility the change in utility derived from an increase in consumption of a particular good o MUhamburgers = ^utility / ^hamburgers o This value will fall (rise) as consumption increases (decreases) ...
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