Chapter 10 notes - Chapter 10- The Rational Consumer...

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Chapter 10- The Rational Consumer Utility: Getting Satisfaction The utility of a consumer is a measure of satisfaction a consumer gets from the consumption of goods and services Economists assume that consumers want to maximize utility Utility and Consumption An individuals consumption bundle is the set of all goods ad services an individual consumes The relationship between an individuals consumption bundle and the total amount of utility it generates is known as the utility function The utility function is modified according to taste The concept of a utility function is just a way of representing the fact that people must make choices and they they make those choices in a more or less rational way A util is a unit of utility Consumers seek to maximize total utility on order to do this consumers must focus on marginal utility The Principle of Diminihsing Marginal Utility Marginal utility is the change in total utility from doing one more thing Marginal utility curve is constructed using midpoints of the unit intervals The marginal utility curve is downaward sloping. The basic idea behind
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This note was uploaded on 09/20/2007 for the course ECON 1110 taught by Professor Wissink during the Fall '06 term at Cornell University (Engineering School).

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Chapter 10 notes - Chapter 10- The Rational Consumer...

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