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ECON 201 (44)
Lecture

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Department
Economics
Course
ECON 201
Professor
Corey Van De Waal
Semester
Fall

Description
utilitythat total ystotalutilityuantita consumerbut reports the qqy11consumers the consumer no longer as the 211theQyuantitqas the quantity that maximizes their maximizes 2that orts the ppq ytotal utility at that priceThis process is repeated for every possible price mapping out the individuals demand curve for the goodreTUBoth theories suggest that at Pmaximizes their total utility at that priceIf prices were to fall to Pquantity QWe can now think of a consumers demand curve as a locus of equilibrium points in pricequantity spacethatmaximizestheconsumerspacemaximizes their total utility at QQQd22QQ11QQLECTURE 4Consumer Behaviour Cardinal Utility TheoryWe will consider two theories of demand cardinal utility theory and indifference curve theoryBoth of these theories are built on the assumption that consumers act in their own best interests so as to maximize their Total Utility TU221P1PPPPPXXTUAX a consumer canTU lepp nXX from a new quantity consumed Range where X 2XXX 1TUXXumed of the goodTU is sometimes for nowffilinear quadratic etcWe make noof the goods in the consumers consumptionTUTUthe e as much pleasure utilityheir wealth for exampleconsumedthe functional form gconsider tconsidertheAssumptions for Cardinal Utility Theorygoods ardindontTU is measurable in numerical termsFor exam gallofy often tions reweppg g FunctionCardinalitydownward sloping portion of the TU curveiii Rationality consumers have the goal of maximizing their total utility subject to certain constraints like ttell if he or she derives twiciiiFunctionofallgoodsconsumediiiTU is a function of utility derived from all iv TU varies directly with quantity consumed up to some point of satiationRational consumers would not consume beyond point A since at quantities beyond point A the consumers TU is fallingAs a resultweoftendonresultof a good compared to the old quantity consmeasured in monetary termsbundleThis function could be linear quasassum
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