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Lecture 45

ECON 1010 Lecture 45: Lecture 45

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ECON 1010
Laura K.Brown

o982 Principles of Microeconomics 9/6/2013 11:26:00 AM CHAPTER 21 – The Theory of Consumer Choice General Equilibrium Analysis: 1. Total utility: consumer benefit for all transactions (want to maximize) 2. Marginal utility: benefit to consumers for consuming an addition unit of something (want to maximize) o Marginal – small, incremental increase (added benefit) 3. Relationship between marginal utility of things and our consumption of things 4. Law of diminishing marginal utility: as we consume more of something, the amount of utility we are getting is decreasing – negative relationship The Budget Constraint: What the Consumer Can Afford: 1. Most people would like to increase the quantity or quality of the goods they consume 2. People consume less than they desire because their spending is constrained or limited by their income 3. Budget constraint: the limit on the consumption bundles that a consumer can afford 4. The slope of the budget constraint mea
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