Notes 5 - Household Consumption Behaviour.docx - Household...

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Household Consumption Behaviour 1) Marginal Utility and Consumer Choice Utility is the satisfaction a consumer receives from consuming some commodity. Total Utility (TU) is the total satisfaction resulting from consumption of a given commodity by a consumer. Marginal Utility (MU) is the additional satisfaction obtained by a consumer from consuming one additional unit of a commodity. Law of Diminishing Marginal Utility The utility that any consumer derives from successive units of a particular product consumed over some period of time diminishes as total consumption of the product increases, cet. par. Utility goes down with increasing consumption. E.g drinking cup of coffee. You will less enjoy it while drinking extra cup one after other.
Example: Alison’s Total and Marginal Utility from Drinking Coke # of Cokes Total Marginal (per day) Utility Utility _______________________________________ _________________________________________ 0 0 1 30 30 2 50 20 3 65 15 4 75 10 5 83 8 6 89 6 7 93 4 8 96 3 9 98 2 10 99 1

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