ECON 1000 Chapter Notes - Chapter 8: Neuroeconomics, Economic Surplus, Bounded Rationality

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Steven Edwards

Document Summary

The choices you make as a buyer of goods and services is influenced by many factors: 1. Consumption possibilities: are all the things you can afford to buy: budget line: marks the boundary between those combinations of goods/services that a household can afford to buy and those it cannot. Limited by income and price of movies and pop. Preferences: the choice lisa makes depends on her likes and dislikes: total utility: is the total benefit a person gets from consumption of goods. The more movies or pop she consumes, the higher her total utility the more she consumes. However, marginal utility decreases: marginal utility: change in the total utility that results from one-unit increase in the quantity of a good consumed, diminishing marginal utility: decrease in marginal utility as the quantity of the good consumed increases. Key assumption: household chooses the consumption possibility that maximizes total utility.