Econ 203 presentation

Econ 203 presentation - Consumer Behavior and Utility...

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Unformatted text preview: Consumer Behavior and Utility Maximization Chapter 7 Review Objective Layman How to spend your money on various goods to make you as happy as possible Objective Economist How to allocate scarce resources (your money) among competing ends (various goods) to maximize utility (happiness) Get the jargon straight Utility of a good Want-satisfying power of that good Satisfaction / pleasure / happiness you get from consuming the good Caution Utility of a particular good varies across people Utility is difficult to measure Pretend that we can measure it in UTILS Some more jargon Total utility Total satisfaction (in UTILS) from consuming some quantity of the good E.g. Total utility from eating 2 apples is 10 UTILS Marginal utility Extra satisfaction from consuming ONE MORE unit of a good Diminishing Marginal Utility As you consume more and more of a good the satisfaction from consuming one more unit of the good (marginal utility) decreases (diminishes) Diminishing Marginal Utility...
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Econ 203 presentation - Consumer Behavior and Utility...

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