ECO100Y5 Chapter Notes - Chapter 6: Marginal Utility, Indifference Curve, Opportunity Cost
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ECO100Y5 Full Course Notes
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Utility- the satisfaction that a consumer receives from consuming some g/s. Total utility- total satisfaction from consuming given commodity by consumer. Marginal utility- additional satisfaction resulting from consuming one more of a g/s. Law of diminishing marginal utility- utility that any consumer derives from successive units of particular product consumed over some period of time diminishes as total consumption of product increases (consumption of all other products= constant) Total utility ^ increasing but @ decreasing rate. Consumers want to maximize their total utility subject to their constraints (eg. income and market prices of various products) Example- consumer has to spend on ipods () or ipads (): 6a. 1- indifference curves. Indifference theory- consumers can always say which of two consumption bundles they prefer without having to pay by how much they prefer it. Bundles in which a person is indifferent means that all bundles give an individual equal satisfaction/utility; a curve for each point of utility.