ECON 1B03 Lecture 7: Module 47 - 13.1 Consumer Theory Utility

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

When consumers consume goods and services, they derive satisfaction (happiness) from their consumption. We assume that consumers try to maximize their utility (maximize their satisfactions) from consuming various bundles of goods and services. The set of all good and services an individual consumes is their consumption bundle. Consuming various amounts of goods and services will give different levels of utility. A utility function gives the total utility, tu, generated by a consumption bundle. To measure utility (an abstract concept) we use units called utils. Every individual values consumption bundles differently than others. For example, i may get a total utility of 1000 utils from going to 8. Buffalo bills" home games where someone else may only get a total utility of 20 utils. The first slice he eats gives him great satisfaction. The second slice makes him even happier because he"s starting to get full.