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ECON 101 2Midtermreview

For example the stockholders of a firm are the

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Unformatted text preview: loses: a deadweight loss arises. Chapter 8: Utility and Demand 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. • Total utility from a good increases as the quantity of the good increases. • For example, as the number of movies seen in a month increases, total utility from movies increases. Marginal Utility • Marginal utility is the change in total utility that results from a one- unit increase in the quantity of a good consumed. • As the quantity consumed of a good increases, the marginal utility from consuming it decreases. • We call this decrease in marginal...
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