ECON 208 Lecture Notes - Ceteris Paribus, Consumer Behaviour, Complementary Good
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ECON 208 Full Course Notes
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Utility: the value that you get (it is not an absolute measure) Utility maximizing consumers adjust their expenditure until the marginal utility per dollar spend is equalized across products. Any change in price generates both an income and a substitution effect. Consumer surplus is the bargain the consumers gets by paying less for the product than the maximum price he or she is willing to pay. Diminishing marginal utility- marginal utility is about that last unit you are consuming. Marginal utility (difference) falls as consumption rises. You"re still better off which each successive thing (if it wasn"t getting better you wouldn"t consume it) but the utility decreases with each one. Consumers must decide how to adjust their expenditure to maximize total utility. A utility-maximizing consumer allocates expenditures so that the utility obtained from the last dollar spent on each product is equal.