ECN 104 Chapter 5: Chapter 5

• School: Ryerson University
• Department: Economics
• Course: ECN 104
• Professor: Halis Yildiz

Document Summary

As a consumer increases consumption of a good/service, the marginal utility (satisfaction) obtained from each additional unit of the good/service decrease: utility: want-satisfying power of a good/service; the satisfaction a person gets from consuming a good/service. Utility and usefulness are not synonymous: utility is subjective, utility is difficult to quantify. Total utility: total amount of satisfaction/pleasure a person derives from consuming some specific quantity: marginal utility: extra satisfaction from consuming one more unit. 5. 2 the theory of consumer choice: rational behaviour: use his/her money income to get the highest satisfaction. Preferences: buyers know how much marginal utility they will get from successive units. Budget constraint: limit that a consumer"s income imposes on the ability of that consumer to obtain goods/services. To obtain the greatest utility, the consumer should allocate money income so that the last dollar spent on each good/service yields the same marginal utility www. notesolution. com.