ECN 104 Lecture 5: Chapter 7
Document Summary
Gains in satisfaction decline as additional units are consumed. Marginal utility extra satisfaction from consuming one more unit. Law of diminishing marginal utility: as a consumer increases consumption of a good or service, the marginal utility obtained from each additional unit of the god or service decreases. Added satisfaction declines as a consumer acquires additional units of a given product. Utility is subjective varies from person to person. Utility is difficult to quantify assume that people can measure satisfaction with units called utils (units of untility) Total utility: the total amount of satisfaction derived from the consumption of a single product or a combination of products. Marginal utility: the extra utility a consumer obtains from the consumption of one additional unit of a product. Exhibits rational behaviour human behaviour based on comparison of marginal costs and marginal benefits; behaviour designed to maximize total utility.