ECON 111 Lecture Notes - Lecture 6: Marginal Utility, Consumer Behaviour, Fixed Price

• School: USF
• Department: Economics
• Course: ECON 111
• Professor: Sandhyarani Patlolla

Document Summary

Deals with how consumers decide what goods and services to purchase. Utility: how to quantitivily measure satisfaction from consuming a good (survey) Cannot compare two different individuals utility to make any conclusions or interpretations. We can use the same individuals utility from two different products to analyze their choices. Total amount of satisfaction from consuming a specific quantity. If tu is increasing marginal utility has to be positive. If tu is decreasing mu is going to be negative. When tu reaches maximum, marginal utility is 0. The gain in total utility becomes smaller as the subsequent unit of a good is consumed. Consumers have preferences and they have a clear sense of those preferences. Goods come with a price tag and individuals choices have no effect on price. Allocate your budget in such a way that every last dollar spent on a good with maximum marginal utility per dollar. Mu/price is equal to the last unit each good consumed.