ECO100Y5 Chapter Notes - Chapter 6: Demand Curve
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ECO100Y5 Full Course Notes
Verified Note
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Document Summary
Economists believe consumers ultimately make decisions in order to maximize their utility. Utility is the satisfaction that a consumer receives from consuming some good/service. Utility is a concept that cannot be measured directly, but is used to understand a consumer and predict behaviour based of utility maximization. Total utility: is the consumer"s total satisfaction resulting from the consumption of a given product. Marginal utility: is the additional satisfaction obtained from consuming one additional unit of a product. The utility that any consumer derives from successive units of a particular product consumed over some period of time diminishes as total consumption of the product increases (holding constant the consumption of all other products). Assumption: consumers seek to maximize their total utility subject to the constraints they face their income and market price. Result: a utility-maximizing consumer allocates expenditures so that the marginal utility obtained from the last dollar spent on each product is equal.
