Utility

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Department
Agriculture + Resrce Econ
Course
AREC 202
Professor
Christopher Goemans
Semester
Fall

Description
26 October Money ≠ happiness? Money → things Lamborghinis Airplanes Yachts Food Shelter Health insurance Imagine this Short-run Choice A: Free dinner at Bisetti’s B: No free dinner at Bisetti’s If money didn’t buy you happiness, you would be indifferent Utility – Happiness Where do you get happiness from? Just a happy person Sense of belongingness Steak, eggs, potatoes As you eat more steak, you become more happy – “more is better” But the more you eat, the less valuable the marginal unit becomes – “diminishing marginal utility” Ribeyes Unit # Total Utils Marginal Utility 1 20 20 2 30 10 3 35 5 4 38 3 5 40 2 Utils : Unit for happiness How many ribeyes should you buy? Depends on price What if steaks cost $5? Now how many should you buy? It really depends on opportunity cost What else could you do with the money? Hamburgers, $1 each Total U Units Marginal Utility 20 1 20 30 2 10 35 3 5 38 4 3 40 5 2 41 6 1 41.5 7 0.5 Hot dogs, $1 each Total U Units Marginal Utility 20 1 20 39 2
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