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Lecture 8 Feb - Diminishing marginal utility explains the...

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Lecture 8 Feb.10 2011 Total Utility: total satisfaction Marginal Utility: satisfaction gained from consuming an additional unit of a good or service How much people value a good depends upon the Utils (satisfaction) they derive from the last one consumed. Diminishing marginal utility explains the law of demand
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Unformatted text preview: Diminishing marginal utility explains the Water Diamond Paradox: we have so much water and not as much diamond. If you are in the desert, then you want water. Benefit exceed the cost Benefit must exceed the cost of the opportunity cost...
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