190 Ch03 Demand and Consumer Behavior Economics ECONOMICS MANAGEMENT SCHOOL.TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY Ch03 Demand and Consumer Behavior
1907 04-2 3.1 Utility Utility =level of happiness or satisfaction associated with alternative choices If buying 3 copies of Microeconomics makes you happier than buying one shirt,then we say that the books give you more utility than the shirt. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 04-2 3.1 Utility • Utility = level of happiness or satisfaction associated with alternative choices – If buying 3 copies of Microeconomics makes you happier than buying one shirt, then we say that the books give you more utility than the shirt
04-3 0 Total and marginal utility total utility -the level of happiness derived from consuming the good marginal utility -the additional utility that is received when an additional unit of a good is consumed change in total utility Marginal utility= change in quantity Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 04-3 Total and marginal utility • total utility - the level of happiness derived from consuming the good • marginal utility - the additional utility that is received when an additional unit of a good is consumed
190 04-4 Law of diminishing MU law of diminishing marginal utility marginal utility declines as more of a particular good is consumed in a given time period. even though marginal utility declines,total utility still increases as long as marginal utility is positive.Total utility will decline only if marginal utility is negative Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 04-4 Law of diminishing MU • law of diminishing marginal utility - marginal utility declines as more of a particular good is consumed in a given time period. • even though marginal utility declines, total utility still increases as long as marginal utility is positive. Total utility will decline only if marginal utility is negative
04-5 Ordinal Versus Cardinal Utility Ordinal Utility Function:places market baskets in the order of most preferred to least preferred, but it does not indicate how much one market basket is preferred to another. Cardinal Utility Function:utility function describing the extent to which one market basket is preferred to another. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 04-5 Ordinal Versus Cardinal Utility Ordinal Utility Function: places market baskets in the order of most preferred to least preferred, but it does not indicate how much one market basket is preferred to another. Cardinal Utility Function: utility function describing the extent to which one market basket is preferred to another