Sess 5 Utility and Demand Ch 8-9

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Business Microeconomics Instructor: Gulnara Moldasheva 1 Utility and Demand CHAPTERS 8-9
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Business Microeconomics Instructor: Gulnara Moldasheva 2 Utility and Demand
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Business Microeconomics Instructor: Gulnara Moldasheva 3 You want Muzart latest hit album, and you want the Madonna single. Will you download the album and the single? Or will you buy two CDs? Or will you buy the album on a CD and download the single? What determines our choices as buyers of recorded music? You know that diamonds are expensive and water is cheap. Doesn’t that seem odd? Why do we place a higher value on useless diamonds than on essential-to-life water?
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Business Microeconomics Instructor: Gulnara Moldasheva 4 UTILITY AND CONSUMER SATISFACTION UTILITY AND CONSUMER SATISFACTION Consumers buy in order to obtain utility , which is the satisfaction received from the consumption of a good. The utility that people gain from their purchases is subjective, varying from person to person. Utility is not measurable, since satisfaction is not measurable. Utility does not imply that a good is useful. Consumers buy in order to obtain Consumers buy in order to obtain utility utility , which , which is the satisfaction received from the is the satisfaction received from the consumption of a good. consumption of a good. The utility that people gain from their The utility that people gain from their purchases is subjective, varying from person to purchases is subjective, varying from person to person. person. Utility is not measurable, since satisfaction is Utility is not measurable, since satisfaction is not measurable. not measurable. Utility does not imply that a good is useful. Utility does not imply that a good is useful.
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Business Microeconomics Instructor: Gulnara Moldasheva 5 Preferences A household’s preferences determine the benefits or satisfaction a person receives consuming a good or service. The benefit or satisfaction from consuming a good or service is called utility . Total Utility Total utility is the total benefit a person gets from the consumption of goods. Generally, more consumption gives more utility. Maximizing Utility
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Business Microeconomics Instructor: Gulnara Moldasheva 6 Total and Marginal Utility Total and Marginal Utility Although utility is not measurable, it can be Although utility is not measurable, it can be modeled as though it were, using the modeled as though it were, using the util util as its as its unit of measure. unit of measure. Total utility Total utility equals the sum of the utils a person equals the sum of the utils a person receives from consuming a specific quantity of receives from consuming a specific quantity of a good. a good. Marginal utility Marginal utility equals the increments to total equals the increments to total utility from changes in consumption.
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  • Spring '14
  • Gulnara Moldasheva, Business Microeconomics

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