chap7 - Chapter7:Consumerchoice Utility...

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Chapter 7: Consumer choice
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Utility Utility = level of happiness or  satisfaction associated with alternative  choices utility maximization
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Total and marginal utility total utility - the level of happiness  derived from consuming the good marginal utility - the additional utility that  is received when an additional unit of a  good is consumed
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Marginal utility 0 0 1 70 2 110 3 130 4 140 5 145 - 70 40 20 10 5 # of slices of pizza total utility marginal utility
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Law of diminishing MU law of diminishing marginal utility  -  marginal utility declines as more of a  particular good is consumed in a given time  period,  ceteris paribus even though marginal utility declines, total  utility still increases as long as marginal utility  is positive. Total utility will decline only if  marginal utility is negative
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Diamond-water paradox As noted by Adam Smith, water is 
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chap7 - Chapter7:Consumerchoice Utility...

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