tailieunhanh - Lecture Economics - Chapter 6: Consumer choice theory

In this chapter, you will learn to solve these economic puzzles: Do white rats obey the law of demand? Under what conditions might you be willing to pay $10,000 for a gallon of water and 1 cent for a one-carat diamond? When ordering Big Macs, milkshakes, pizza, and other goods, how can you obtain the highest possible satisfaction? | Chapter 6 Consumer Choice Theory ©2000 South-Western College Publishing Key Concepts Summary Practice Quiz Internet Exercises * In this chapter, you will learn to solve these economic puzzles: Under what conditions might you be willing to pay $10,000 for a gallon of water and 1 cent for a one-carat diamond? When ordering Big Macs, milkshakes, pizza, and other goods, how can you obtain the highest possible satisfaction? Do white rats obey the law of demand? * What is Util? A hypothetical unit used to measure how much utility a person obtains from consuming a good * What is Utility? The satisfaction, or pleasure, that people receive from consuming a good or service * What is Total Utility? The amount of satisfaction received from all the units of a good or service consumed * Why does a consumer buy one bundle of goods, rather than another? Consumers make one choice over another depending on their marginal utility * What is Marginal Utility? The change in total utility from one additional unit of a good or service * What is the Law of Diminishing Marginal Utility? The principle that the extra satisfaction of a good or service declines as people consume more in a given period * 8 6 4 2 1 2 3 4 Diminishing Marginal Utility MU Marginal Utility Q * 16 12 8 4 1 2 3 4 Total Utility TU Utils Q * When is Total Utility maximized? When the marginal utility per dollar of each good is equal and the entire budget is spent * What is Consumer Equilibrium? A condition in which total utility cannot increase by spending more of a given budget on one good and spending less on another good * Even though water provides a greater utility than diamonds, why are diamonds more expensive? Water is plentiful in most of the world, so its marginal utility is low * 8 6 4 2 1 2 3 4 Marginal Utility of Diamonds MU Q Marginal Utility S MUd * 8 6 4 2 1 2 3 4 Marginal Utility of Water MU Q Marginal Utility S MUw * Marginal Utility for Big . | Chapter 6 Consumer Choice Theory ©2000 South-Western College Publishing Key Concepts Summary Practice Quiz Internet Exercises * In this chapter, you will learn to solve these economic puzzles: Under what conditions might you be willing to pay $10,000 for a gallon of water and 1 cent for a one-carat diamond? When ordering Big Macs, milkshakes, pizza, and other goods, how can you obtain the highest possible satisfaction? Do white rats obey the law of demand? * What is Util? A hypothetical unit used to measure how much utility a person obtains from consuming a good * What is Utility? The satisfaction, or pleasure, that people receive from consuming a good or service * What is Total Utility? The amount of satisfaction received from all the units of a good or service consumed * Why does a consumer buy one bundle of goods, rather than another? Consumers make one choice over another depending on their marginal utility * What is Marginal Utility? The change in total .