, key concepts
rational
utility behaviour
·
·
cardinal utility ·
budget constraint
·
ordinal utility ·
budget line
·
total utility indifference curve
·
marginal utility ·
MRS
law of
diminishing marginal utility ·
equilibrium
utility
·
Utility >
- level of satisfaction achieved
by consuming
a
good / service
↳ I NOT the same as usefulness
↳ 2
Utility is
Subjective
Cardinal utility Ordinal
vs
utility
↓ ↓
utility that can be
utility that is not quantifyable but
measured in numerical can be ordered by comparisons
values
>
- units are called utils
·
Total Utility : The total amount of satisfaction/pleasure a
person receives
from
consuming
additional unit of
·
Marginal utility : The extra satisfaction/pleasure a
person gets from an
product
↳ utility that results from the consumption of product
↓
in total one more
the
change
Mu = XTY
Q
Tota
Marginal utility graph
utility ,
-
-
-
by
diminishing
TH 10
30
+ a MU remains positive then
amount until it S
reaches a 'top' at 6 units
20
>
6
·
reaches a max then into
,
L
↓ new continues the
declines satisfaction
negative
ass
2 as -
8 with each additional unit
6
units consumed .
consumed
tils
rational
utility behaviour
·
·
cardinal utility ·
budget constraint
·
ordinal utility ·
budget line
·
total utility indifference curve
·
marginal utility ·
MRS
law of
diminishing marginal utility ·
equilibrium
utility
·
Utility >
- level of satisfaction achieved
by consuming
a
good / service
↳ I NOT the same as usefulness
↳ 2
Utility is
Subjective
Cardinal utility Ordinal
vs
utility
↓ ↓
utility that can be
utility that is not quantifyable but
measured in numerical can be ordered by comparisons
values
>
- units are called utils
·
Total Utility : The total amount of satisfaction/pleasure a
person receives
from
consuming
additional unit of
·
Marginal utility : The extra satisfaction/pleasure a
person gets from an
product
↳ utility that results from the consumption of product
↓
in total one more
the
change
Mu = XTY
Q
Tota
Marginal utility graph
utility ,
-
-
-
by
diminishing
TH 10
30
+ a MU remains positive then
amount until it S
reaches a 'top' at 6 units
20
>
6
·
reaches a max then into
,
L
↓ new continues the
declines satisfaction
negative
ass
2 as -
8 with each additional unit
6
units consumed .
consumed
tils
