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Unformatted text preview: n to maximize is (the Satisfaction obtained from consumption). inal utility satisfaction from an additional unit f diminishing marginal utility ns downward sloping demand e curve, one must always acquire more of good to compensate for the loss of the other. The indiffere line rightward, with no change in slope. Px/py remains constant. good rotates the budget line outward . Px/py changes. good rotates the budget line in ward.Px/py changes ne leftward, with no change in slope. Px/py remains constant. a ximize utility or well-being timization Principle: MUx/Px=MUy/Py gain from reallocating expenditures MUx/Px < MUy/Py ve away from x toward y MUx/Px > MUy/Py ve away from y toward x ximize utility or well-being imization Principle: MUx/Px=MUy/Py gain from reallocating expenditures Ux/Px < MUy/Py ve away from x toward y MUx/Px > MUy/Py ve away from y toward x Chapter 5: Consumer Behavior You are constantly making economic decisions Constraints – Too little income or wealth – Too little time to enjoy it all Preference- comparing commodity bundles- ranking them in order of preference • Consumer theory-The theory of individual decision making Understanding consumer behavior, then, is the first step in making: Profitable pricing Advertising Product design And production decisions In this chapter you will learn: • Total utility and marginal utility • Law of diminishing marginal utility • Budget Constraint(s) • Optimal Consumption Decisions • Search theory and marketing •...
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This note was uploaded on 08/30/2011 for the course MGE 302 taught by Professor Isse during the Fall '08 term at SUNY Buffalo.
- Fall '08