Lesson title: Marginal utility and consumer behaviour

HOW DO CONSUMER CHOOSE TO BUY A PRODUCT ?!

Quantity Marginal Total

of candies utility utility
consumed (MU)
1
2
3
4
5
6

Definition:

1.Utility

2.Marginal utility

3.Total utility

Plot the marginal utility and total utility below

Observations from the diagram:

Law of diminishing marginal utility states:

Maximization of consumer s utility happens

………………………

Cardinal utility= An actual measure of utility,in utils.

Ordinal utility = The rankings of the utility received from consuming various amounts of a good.

Marginal utility curve slopes downward and to the right. Why?

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CONSUMER’S TASTES: INDIFFERENCE CURVES

Indifference Curves—What Do They Show?

The curve showing the various combinations of two commodities that give the consumer equal
satisfaction.
 What can you say about indifference curve U2 and U0?

Indifference map = The entire set of indifference

curves reflecting the consumers tastes and
preferences.

Marginal rate of substitution ( MRS ) = The amount of a good that a consumer is willing to give up for an
additional unit of another good while remaining on the same indifference curve. MRS=-

∑!Take information fromt the diagram

and calculate:

MRS from A to B=

MRS from B to C=

MRc from C to F=
Extension activity.

How can you explain these curves:

Applied Economics
The following table shows the total utility gained by an individual from the consumption of three goods: