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UTILITY ANALYSIS: A subset of consumer demand theory that analysis consumer behavior and market demand using total utility and marginal utility. The key principle of utility analysis is the law of diminishing marginal utility, which offers an explanation for the law of demand and the negative slope of the demand curve.
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Lesson 9: Consumer Demand | Unit 2: Total Utility
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Page: 9 of 22
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In this unit, you should have learned about:- Total utility as the total satisfaction obtained from consuming one or more goods.
- That utility is measured by utils, which is a hypothetical and unrealistic measure, but helps illustrate the utility concept.
- The total utility schedule as a table relating total utility and the quantity consumed.
- How total utility increases with the quantity consumed, but reaches a peak, then declines.
- The motivation of utility maximization, but that consumers are typically faced with constrained utility maximization.
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RATIONAL BEHAVIOR The notion that people make decisions based on the desire to obtain the greatest amount of satisfaction. Rational behavior essentially means that people prefer more to less. The presumption of rational behavior underlies most economic analysis, especially that applied to consumer demand theory.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time surfing the Internet looking to buy either a green and yellow striped sweater vest or a Boston Red Sox baseball cap. Be on the lookout for strangers with large satchels of used undergarments.
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In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
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"Act well at the moment, and you have performed a good action for all eternity." -- Johann Kaspar Lavater
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BCUA
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