ECON101 Lecture Notes - Lecture 8: Utility, Conspicuous Consumption, Easterlin Paradox

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Fatma

Document Summary

Economists assume that people behave to make themselves as well off as possible. Marginal utility theory is one approach that can be used to understand consumer choice. The choices you make as a buyer of goods and services is influenced by many factors, which economists summarize as: consumption possibilities, preferences. Consumption possibilities are all the things that you can afford to buy. A household"s prefere(cid:374)(cid:272)es deter(cid:373)i(cid:374)e the (cid:271)e(cid:374)efits or satisfaction a person receives consuming a good or service. The benefit or satisfaction from consuming a good or service is called utility. Total utility is the total benefit a person gets from the consumption of goods. Learn example of lisa (slide 12 chapter 8) Marginal utility is the change in total utility that results from a one-unit increase in the quantity of a good consumed. As the quantity consumed of a good increases, the marginal utility from consuming it decreases.