Economics 1021A/B Lecture 12: Utility and Demand

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Nicholas Kahnert

Document Summary

Economics1021 lecture 012 chapter 8 utility and demand. Consumption possibility and choices: consumer"s choice of what to buy is influenced by: consumption possibilities, preferences. All things that the producer can afford to buy depends on income and prices. Consumer"s budget line: all possible consumption if all. Income is spent: on the lines from point a f, similar to a ppf, constant opportunity price, lines outside unattainable, lines side are affordable/attainable. Ex. lisa only buys 2 goods: movies and pop. When lisa spends all income on movies and pop, she reaches the limit of her consumption possibility. Preferences: the likes and dislikes of a consumer. Utility: the benefit or satisfaction from consuming a good or service. 2 utility concepts: marginal utility and total utility. Change in total utility that result from unit increase in quantity of the good consumed. Diminishing marginal utility: as quantity consumed of increases, the marginal utility from it decreases.