CO SCI 136 Lecture Notes - Lecture 16: Tiramisu, Marginal Utility, Utility
Document Summary
Consumer theory and new trends in economics: consumers make choices by maximizing utility, utility and consumption. Utility of a consumer: measure of satisfaction the consumer derives from the consumption of goods and services. Individual"s consumption bundle: collection of all the foods and services consumed by that individual. Individual"s utility function: gives the total utility generated by consumption bundle. The unit of utility is a util: utility and consumers: Marginal utility (mu): the change in utility from consuming an additional unit: change in total utility generated by consuming one additional unit. Diminishing marginal utility: each additional unit of a good adds less to utility than the previous unit (e. g. tiramisu) Each successive unit consumed adds less to total utility that the previous unit. Total utility increase until it reaches its maximum utility level 64 at 8 clams then decrease. Indifference curve: shows the bundles of consumption that make the consumer equally happy.
