ECON 1000 Lecture 8: Chapters 8 lecture notes

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Ardeshir Noordeh

Document Summary

When lisa spends all of her income, she reaches the limits of her consumption possibilities. Px over py = slope: the relative price of x in terms of y: a point inside the budget line a (affordable, and you"re saving), point. Bundle: 6 movies and 4 pops: a rise in the price of pop, now suppose the price of pop rises. We know that mup/pp falls; the consumer cuts down on the number of pop consumed: to restore consumer equilibrium (maximum total utility), the consumer decreases the quantity of pop consumed to drive up the. Mup and increases the quantity of movies seen to drive down. We use so much water that the marginal utility from water consumed is small, but the total utility is large. We buy few diamonds, so the marginal utility from diamonds is large, but the total utility is small: paradox resolved: the paradox is resolved by distinguishing between total utility and marginal utility.