Chap5 - Choices by Consumers Chapter 5 Econ 101.01 Fall...

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Unformatted text preview: Choices by Consumers Chapter 5 Econ 101.01 Fall 2011 Prof. Michael Potepan Utility maximization Utility satisfaction consumers receive from consuming a good in real world, immeasurable in economic theory, we sometimes pretend we can measure it Utility maximization objective of consumers is to get the greatest satisfaction Constraints on maximizing utility Consumer choice consumers must make choices because opportunity to buy things (budget or income) is limited Two most important constraints on consumer choice: budget (or income) prices of goods Other constraints may be important too time information legal constraints Diminishing marginal utility Marginal utility the additional utility the consumer receives from consuming one more unit of the good Diminishing marginal utility Marginal utility the additional utility the consumer receives from consuming one more unit of the good MU X = Change in Utility Change in Consumption = U X Diminishing marginal utility Marginal utility the additional utility the consumer receives from consuming one more unit of the good Diminishing marginal utility MU X = Change in Utility Change in Consumption = U X Diminishing marginal utility Marginal utility the additional utility the consumer receives from consuming one more unit of the good Diminishing marginal utility The more units of a good the consumer consumes MU X = Change in Utility Change in Consumption = U X Diminishing marginal utility Marginal utility the additional utility the consumer receives from consuming one more unit of the good Diminishing marginal utility The more units of a good the consumer consumes the less additional utility the consumer receives MU X = Change in Utility Change in Consumption = U X Diminishing marginal utility Marginal utility the additional utility the consumer receives from consuming one more unit of the good Diminishing marginal utility The more units of a good the consumer consumes the less additional utility the consumer receives marginal utility diminishes. MU X = Change in Utility Change in Consumption = U X Diminishing marginal utility Marginal utility the additional utility the consumer receives from consuming one more unit of the good Diminishing marginal utility The more units of a good the consumer consumes the less additional utility the consumer receives marginal utility diminishes. Sushi example MU X = Change in Utility Change in Consumption = U X Utility & marginal utility for Sushi Utility & marginal utility for Sushi Quantity Total Utility Marginal Utility Marginal Utility per Dollar Utility & marginal utility for Sushi Quantity Total Utility Marginal Utility Marginal Utility per Dollar Utility & marginal utility for Sushi Quantity Total Utility Marginal Utility Marginal Utility per Dollar 1 80 Utility & marginal utility for Sushi Quantity Total Utility Marginal Utility Marginal Utility per Dollar 1 80 2 140 Utility & marginal utility for Sushi Quantity Total Utility Marginal Utility Marginal Utility per Dollar 1 80 2 140 3 180 Utility & marginal utility for Sushi Quantity Total Utility Marginal Utility Marginal Utility per Dollar 1 80 2 140 3 180 4 200 Utility & marginal utility for Sushi Quantity Total Utility Marginal Utility Marginal Utility per Dollar 80 1 80 2 140 3 180 4 200 Utility & marginal utility for Sushi Quantity Total Utility Marginal Utility Marginal Utility per Dollar 80 1 80 60 2 140 3 180 4 200 Utility & marginal utility for Sushi Quantity Total Utility Marginal Utility Marginal Utility per Dollar 80 1 80 60 2 140 40 3 180 4 200 Utility & marginal utility for Sushi Quantity Total Utility Marginal Utility Marginal Utility per Dollar 80 1 80 60 2 140 40 3 180 20 4 200 Marginal utility per dollar spent...
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This note was uploaded on 10/12/2011 for the course ECON 101 taught by Professor Pgking during the Spring '08 term at S.F. State.

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Chap5 - Choices by Consumers Chapter 5 Econ 101.01 Fall...

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