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Unformatted text preview: Consumer Behaviour 27/09/09 1:51 PM 23:14 Learning Objectives: The difference between marginal and total utility: Marginal utility is the additional satisfaction obtained from the consumption of each additional item. As more items are consumed, the law of diminishing marginal utility states that the marginal utility for each additional item decreases. Total utility is the sum of all marginal utilities for all items consumed. It is the total satisfaction received from the consumption of all goods. Utility-maximization Consumers adjust their expenditures so that the marginal utility per dollar spent is equal for all products. Mux = Muy Mux = Px Px Py Muy Py Effects on price change Substitution effect is the change in quantity demanded due to a change in relative prices, holding real income constant. Substitution effect is always negative because as prices, holding real income constant....
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This note was uploaded on 10/19/2011 for the course ECON 101/102 taught by Professor Gateman&neary during the Spring '09 term at The University of British Columbia.
- Spring '09