ECON 1010 Lecture Notes - Lecture 1: Economic Surplus, Demand Curve, Bounded Rationality

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As consumers, the choices we make are in uenced by our consumption possibilities and preferences. Consumption possibilities: shows the combinations of goods that a consumer can afford, exhibits a trade-off as to increase one good, you must decrease the other good, limited to a person"s income and price of a good. A consumer budget line: budget line, shows the limit between what a consumer can afford and what they cannot, points inside and on the budget line are affordable, outside points are unaffordable. Changes in consumption possibilities: changes in income, shifts the budget line inward/outward with no change to slope, changes in price of good, changes the slope. Preferences: in order to describe preferences, we use the concept of utility, bene t received from consumption, utility is distinguished by total utility and marginal utility. Total utility: can be measured from any scale, total bene t received from consumption, depends on level of consumption, more consumption=more total utility.

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