Economics 1010 Lecture Notes - Economic Surplus, Bounded Rationality, Normal Good
22 Oct 2012
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Document Summary
The choices you make as a buyer of good and services is influenced by many factors, which economists summarize as: consumption possibilities, preferences. Consumption possibilities are all the things that you can afford to buy. We"ll study the consumption possibilities of lisa, who buys only two good; movies and pop. The budget line is a constraint on lisa"s budget choices. Lisa can afford any point on her budget line, or inside it. Lisa can not afford any point ouside her budget line. The choice that lisa makes depends on her preferences- her likes and dislikes. Her benefit or satisfaction from consuming a good or service is called a utility. Total utility is the total benefit a person gets from the consumption of goods. Total utility from good increases as the quantity of the good increases: as lisa sees more movies month, her total utility form movies increases, and from pop decreases.
