ECON101 Lecture 9: ECON 101 Lec 9 - Utility and Choice

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Predrag Rajsic

Document Summary

Econ 101 lec 9 utility and choice. Figure (a) shows lisa"s total utility and marginal utility from cola. Total utility from cola increases as more cola is consumed. The bars along the total utility curve show the extra total utility (marginal utility) from each additional case of cola. As lisa increases the quantity of cola she drinks, her marginal utility from cola diminishes. The key assumption is that the household chooses the consumption possibility that maximizes total utility. The direct way to find the utility-maximizing choice is to make a table in a spreadsheet and do the calculations. Find the total utility for each just-affordable combination. The utility-maximizing combination is the consumer"s choice. Lisa has a month to spend on movies and cola. The price of a movie is and cola is a case. Each row of table 8. 2 shows a combination of movies and cola that exhausts lisa"s . Find the total utility for each just-