21 - 1 Copyright McGraw-Hill/Irwin, 2002 The Law of Dema nd Law of Diminish ing Marginal Ut ility Total and Margi nal Utility Theory of Consumer Behavior Utility Maximizing Combination Utility Maximization and the Demand Curve Applications and Extensions Key Terms Previo us Slide Next Slid e End Show Consumer Behavior and Utility Maximization 21 C H A P T E R
12
Embed
21 - 1 Copyright McGraw-Hill/Irwin, 2002 The Law of Demand Law of Diminishing Marginal Utility Total and Marginal Utility Theory of Consumer Behavior.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
21 - 1Copyright McGraw-Hill/Irwin, 2002
The Law of Demand
Law of Diminishing Marginal Utility
Total and Marginal Utility
Theory of Consumer Behavior
Utility Maximizing Combination
Utility Maximization and the Demand Curve
Applications and Extensions
Key Terms
PreviousSlide
NextSlide
EndShow
Consumer Behavior andUtility Maximization
21C H A P T E R
21 - 2Copyright McGraw-Hill/Irwin, 2002
The Law of Demand
Law of Diminishing Marginal Utility
Total and Marginal Utility
Theory of Consumer Behavior
Utility Maximizing Combination
Utility Maximization and the Demand Curve
Applications and Extensions
Key Terms
PreviousSlide
NextSlide
EndShow
LAW OF DIMINISHINGMARGINAL UTILITY
• Utility Defined• Subjective Nature• Difficult to QuantifyTotal UtilityMarginal Utility
graphically examined...
21 - 3Copyright McGraw-Hill/Irwin, 2002
The Law of Demand
Law of Diminishing Marginal Utility
Total and Marginal Utility
Theory of Consumer Behavior
Utility Maximizing Combination
Utility Maximization and the Demand Curve
Applications and Extensions
Key Terms
PreviousSlide
NextSlide
EndShow
TOTAL AND MARGINAL UTILITYTacos
consumedper meal
TotalUtility,Utils
MarginalUtility,Utils
01234567
010182428303028
10 8 6 4 2 0 -2
Units consumed per meal
Units consumed per meal
30
20
10
To
tal
Uti
lity
(u
tils
)M
arg
ina
l U
tili
ty (
uti
ls)
10 8 6 4 2 0 -2
TU
MU
0 1 2 3 4 5 6 7
1 2 3 4 5 6 7
21 - 4Copyright McGraw-Hill/Irwin, 2002
The Law of Demand
Law of Diminishing Marginal Utility
Total and Marginal Utility
Theory of Consumer Behavior
Utility Maximizing Combination
Utility Maximization and the Demand Curve
Applications and Extensions
Key Terms
PreviousSlide
NextSlide
EndShow
THEORY OF CONSUMER BEHAVIOR
A Typical Consumer...• Exhibits Rational
Behavior• Has Clear-Cut
Preferences• Subject to a Budget
Constraint• Responds to Price
Changes
21 - 5Copyright McGraw-Hill/Irwin, 2002
The Law of Demand
Law of Diminishing Marginal Utility
Total and Marginal Utility
Theory of Consumer Behavior
Utility Maximizing Combination
Utility Maximization and the Demand Curve
Applications and Extensions
Key Terms
PreviousSlide
NextSlide
EndShow
THEORY OF CONSUMER BEHAVIOR
Utility Maximizing Rule
The consumer’s money income should be allocated so that the last dollar spent on each product yields the same amount of extra (marginal) utility