ECON 110 Chapter Notes - Chapter 6: Marginal Utility, Giffen Good, Conspicuous Consumption

• School: Queen's University
• Department: Economics
• Course: ECON 110
• Professor: Ian James Cromb

Document Summary

Consumers make decisions that economists assume are motivated through maximizing utility. Utility: the satisfaction that a consumer receives from consuming some good or service. Total utility: the total satisfaction resulting from the consumption of a given commodity by a consumer ex. Consuming five bottles of fruit juice per day. Marginal utility: the additional satisfaction obtained from consuming one additional unit of commodity ex. The additional satisfaction provided through the consumption of the fifth juice per day. The utility-maximizing consumer should consume juice and burritos to the point at which their marginal utility per dollar spent on the last juice is equal to the marginal utility on the last burrito. A utility-maximizing consumer allocated expenditures so the marginal utility obtained from the last dollar spent on each product is equal. Utility theory is used by economists to predict how consumers behave when faced with events such a changing prices and incomes.