Lecture 9-Beneath the Demand and Total Revenue

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1 Aug 2010
School
Department
Course
Professor
Thursday, October 15, 2009.
Beneath the Demand and Supply Curve: Overview
Principal of Diminishing Marginal Utility
Total utility: total satisfaction to person from consumption of products
Marginal utility: Additional satisfaction (change in total utility) from consumption of
one more units of products
Principal of Diminishing Marginal Utility:
As a person consumes more of a good, the marginal utility of that good
declines.
Numeral Example
Movie per Month Total Utility (TU) Marginal Utility (MU)
0 0 -
1 30 30
2 50 20
3 65 15
4 75 10
5 83 8
6 89 6
7 93 4
8 96 3
9 98 2
10 99 1
SS
Q
P
DD
1. Perfect Competition
2. Profit Maximizing Behaviour
3. Short-run and Long-run Equilibrium
a) Preference
b) Rational Choice
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