Class Notes - 10-3-07

Class Notes - 10-3-07 - Microeconomics Class Notes 10/3/07...

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Microeconomics – Class Notes – 10/3/07 Marginal Benefit is the WTP for one additional unit. Utility is the satisfaction that results from consumption. We only care about “marginal” decisions for the rest of the semester D. Marginal Utility - Utility value from one additional unit of consumption - Marginal Utility EQUATION : (Change in Utility divided by the Change in Quantity) (Change In U) / (Change in Q) - Marginal Utility is the Increase in utility from the last unit of consumption. Quantity Utilitiy Marginal Utility 0 0 ------------------------------ 1 70 70 (70 – 0) 2 120 (120 – 70) / (2-1) = 50 3 160 40 Always start at “0,” even though the table will start usually with “1” because “0” is always assumed. Quantity Utility (Total) Marginal Utility 0 0 0 1 10 10 2 15 5 3 18 3 4 20 2 5 21 1 Total Utility is very similar to Utility with the exception that Utility is unitless whereas WTP is expressed in dollar amounts. o
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Class Notes - 10-3-07 - Microeconomics Class Notes 10/3/07...

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