ECO100Y5 Lecture Notes - Lecture 4: Indifference Curve, Budget Constraint, Normal Good
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ECO100Y5 Full Course Notes
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Show how this comes from underlying individual decisions. Address how customers decide exactly how much of which good to consume. The satisfaction that a consumer receives from consuming some good or service. Total utility the consumer"s total satisfaction resulting from the consumption of a given product. The additional satisfaction obtained from consuming one additional unit of a product. The utility that any consumer derives from successive units of a particular product consumed over some period of time diminishes as total consumption of the product increases (holding constant the consumption of all other products). Consumers seek to maximize their total utility subject to the constraints they face. A utility - maximizing consumer allocates expenditures so that the marginal utility obtained from the last dollar spent on each product is equal. For two products x and y, the utility maximizing condition is. Mux / px = muy / py or. Mux / muy = px / py.
