432review%20handout%20on%20utility[2]

# 432review%20handout%20on%20utility[2] - Dr.Westerhold...

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Dr. Westerhold Econ 432 BASICS ON UTILITY—REVIEW FROM PRINCIPLES Utility : measure of benefit received from consuming a good Total utility : total satisfaction from accumulated consumption (TU) Marginal utility : additional benefit from increasing consumption by one unit. (MU  or  TU/ Q) Chart with TU and MU Given TU fill in MU or if given parts of TU and MU fill in the rest Pizza TU MU 0 0 1 50 50 2 80 30 3 100 20 4 100 0 5 95 -5 TU increases as your consume more TU increasing at a decreasing rate (less and less)  MU is diminishing as you consume more called diminishing marginal utility: The  more you consume of a given product, the less value each successive unit  provides. Applies only to the same product (4 th  coke less valued then 3 rd  coke; not  4 th  coke is less valued than 3 rd  pizza) Consumers may consume as long as MU>=0 (as long as they receive

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• Spring '10
• Jannett
• Utility, Harshad number, \$2.00, \$1.00, \$8.00, \$8

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