econ101 ch5 part 2 notes

econ101 ch5 part 2 notes - other goods constant...

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Chapter 5 How do consumers behave (make decisions)? goal: maximize “utility” (“happiness”) subject to constraints “marginal utility per dollar” spent on a good or service will play key role Law of Diminishing Marginal Utility (LDMU): the value that a consumer places on additional units of a particular good will diminish as total consumption of that good increases (holding
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Unformatted text preview: other goods constant) “utility” (U) – level of satisfaction from consumption (measured in “utils”) “marginal” - what happens with “the next” unit (extra, incremental) ● marginal utility (MU): the change in utility derived from consuming an additional unit of a good = the amount of utility gained: MU = (change in U / change in Q)...
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This note was uploaded on 09/23/2009 for the course ECON 101 taught by Professor Brentkreider during the Fall '07 term at Iowa State.

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