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Ch 6 Consumer Behaviour

Ch 6 Consumer Behaviour - ConsumerBehaviour:51PM 23:14...

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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 
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