ECO101H1 Chapter Notes - Chapter 10: Marginal Utility, Budget Constraint, Demand Curve
98
ECO101H1 Full Course Notes
Verified Note
98 documents
Document Summary
Each individual tries to maximize personal measure of satisfaction gained from consumption of goods and services. Consumer utility: saving is like purchasing the good of future consumption, rational choices maximize utility. Utility and consumption: every bundle can be ranked. Consumption bundle: set of all goods and services an individual consumes: all items are goods Commute time is bad; closeness to campus is good. Relationship between consumption bundle and total amount of utility generated for individual is utility function. Utility function is representation that people take preference into account when consuming. Does not depend on prices or income: utility is based on individual scoring system. Cannot make interpersonal comparisons: number of utils has no meaning; changes in number of utils has meaning. Utility comes from having a complete set. Budget constraint: cost of consumption bundle must be less than income. Consumption possibilities: set of all consumption bundles that can be consumed given income and prices.
