ECON 110 Lecture Notes - Lecture 9: Demand Curve, Inferior Good, Normal Good

• School: Queen's University
• Department: Economics
• Course: ECON 110
• Professor: Michael Frederick Barber

Document Summary

Total utility: overall amount of happiness from all consumption, most of the time, total utility is directly related to consumption. If mu < 0, additional consumption makes you less happy (eat too much you would feel sick, exercise to the point of injury, etc. : marginal utility rarely (and only temporarily) increases for each additional unit of consumption. Consumer optimum: combination of goods and services that maximizes utility for a given income, consumers will be able to optimize consumption by spending money on goods that give the highest marginal utility per dollar. Two goods, x and y: find which one will give us the highest marginal utility per dollar. Marginal utility of x / price of x and marginal utility of y / price of y. If the x side is higher, the consumer should spend their next dollar on x: after this consumption, however, mu of x will fall!