ECON101 Lecture Notes - Marginal Utility, Limited Liability, Marginal Cost

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ECON101 Full Course Notes
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ECON101 Full Course Notes
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Utility is an expression or measure of consumer"s preferences. Alone, the number of utils assigned to a commodity by a consumer is meaningless. What is meaningful is how the number of utils assigned by the consumer to a unit of a commodity compares to the number of utils assigned to other units of the same commodity or units of other commodities. Total utility: (tu) the total utility attributed to the consumption of various units of a particular commodity. Marginal utility: (mu) the addition to total utility attributed to the consumption of each additional unit of the commodity. As we get more units of a commodity, the mu decreases (as in example) . Dmu: diminishing marginal utility: during a specified period of time, a consumer added utility (mu) diminishes with the consumption of each additional unit of the output. This is the norm, no matter what product. (bar of gold ex. ) Possible exceptions: (ex. being a set collector paintings etc. )

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