AmosWEB eTutor: Consumer Demand: Lesson Menu

	Thursday September 2, 2010 Return to Contents

Topic Menu
Unit 1: Demand Theory
Making Decisions The Theory A Beach Trip Utility On To Demand Unit 1 Review
Unit 2: Total Utility
A Measure Of Satisfaction Total Utility Schedule Utility Maximization Unit 2 Review
Unit 3: Marginal Utility
Incremental Satisfaction Measuring Marginal Utility Diminishing Marginal Utility The Law Getting Satisfied Diamond-Water Paradox Unit 3 Review
Unit 4: The Curves
Total Utility Marginal Utility Both Curves Unit 4 Review
Unit 5: Taking Stock
Two Laws Constrained Choices Other Goods Unit 5 Review

Consumer Demand

If I'm anything, I'm a fun-loving sort of guy. Give me a day at the beach playing volleyball or a trip to the Happy-Time Gala-World, Fun-Land Amusement Park for repeated rides on the Monster Loop Death Plunge Roller Coaster, and I am a satisfied guy. I also enjoy an afternoon at the old ball park eating peanuts and watching the Shady Valley Primadonnas take on their long-time rivals the Oak Town Sludge Puppies. And of course, there's always fun to be had with an evening out on the town with dinner, dancing, and the floor show at the Shady Valley Dinner Theater. I also enjoy getting a flu shot, taking allergy medication, and repairing my sewer line.

"But wait", you are prone to interject, "flu shots, allergy medication, and sewer line repairs are anything but fun."

And I am prone to agree... with qualification. While such activities might not provide rip-roaring, knee-slapping fun, like beach volleyball and roller coaster rides, they do share the common trait of providing satisfaction. A flu shot might not be exceedingly fun, but it does satisfy a want or need, just like eating peanuts at a ball game. It might provide a different type of satisfaction, but it is satisfaction nonetheless. This whole process of satisfying wants and needs is not only the essence of the fundamental scarcity problem, it's also the essence of this current lesson consumer demand theory.

This lesson discusses the basics of consumer demand theory, especially the notion of utility. Utility is the fancy-schmancy economic term that means satisfying wants and needs. The purpose of this lesson is to set the stage for a behind-the-scenes look at the demand-side of the market. Because the prices buyers are willing to pay for the goods depend on the utility, an understanding of demand requires an understanding of utility.

The first unit of this lesson, Demand Theory, introduces the concept of utility and previews the relation between utility, consumer decision making, and demand.
In the second unit, Total Utility, we take a look at the first of two key technical notions of utility that are used to examine the relation between utility and demand.
The third unit, Marginal Utility, presents and discusses the second of the two technical notions of utility, and the most important notion underlying demand.
The fourth unit, The Curves, illustrates the total utility and marginal utility concepts with handy graphs.
The fifth unit, Taking Stock, then wraps up this lesson with an extended preview of the relation between utility and demand.

Learning Objectives

Consider these ten learning objectives as you investigate the concept of utility.

The importance of utility in consumer decision making.
Utility as the satisfaction received from consuming goods.
Total utility as the total satisfaction received from consuming several units of a good.
The goal of utility maximization that prompts human behavior.
Marginal utility as the extra satisfaction received from consuming one unit of a good.
The law of diminishing marginal utility and its importance to consumer demand.
How the diamond-water paradox illustrates the difference between total utility and marginal utility.
How total utility and marginal utility are represented with total utility and marginal utility curves.
That marginal utility is the slope of the total utility curve.
The relation between the law of diminishing marginal utility and the law of demand.