BU111 Lecture Notes - Lecture 2: Demand Curve, Utility, Opportunity Cost
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Utility is a concept: utility is a concept ,easier of consumer satisfaction or value, assume that consumers make choices to maximize utility, assess utility based on observed consumer choices. Consumers are assumed to value those things they choose to. Key concept in utility theory consumers derive less value from successive units of a particular type of consumption. You value your first coffee of the day more than your second. Each additional coffee adds some utility, but less than the previous one. Focus on incremental changes i. e. consuming ne more or few of a particular product. As the price goes down we by more. As price increases, number of units purchased falls. Market demand just individual demand curves add together. When the price of coffee increases, other products become relatively cheaper. Maximizing utility requires substituting towards consuming more of other products, and. Subsotiton effects are always negative increasing relative price of a good reduces ;.
