ECON 101 Chapter Notes - Chapter 6: The O.C., Indifference Curve, Normal Good
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ECON 101 Full Course Notes
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Utility- the satisfaction that a consumer receives from consuming some good or service. Total utility - the total satisfaction resulting from the consumption of a given commodity by a consumer. Marginal utility - the additional satisfaction obtained from consuming one additional unit of a commodity. Central hypothesis of utility theory is called the law of diminishing marginal utility. The utility that any consumer derives from successive units of a particular product consumed over some period of time diminishes as total consumption of the product increases (holding constant the consumption of all other products). By assuming utility can be measured, we can interpret the different amount of utility received from consuming different units. This is helpful assumption to let us see the difference between total utility and marginal utility. When one consumes more and more bottles of juice, total utility rises but marginal utility declines, as consumption increases.
