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Chapter 8 (Utility and Demand) (Utility-Maximizing Choice（Evan） (Choosing…

- - - - Marginal utility from a good is the change in total utility that results from a unit-increase in the quantity of the good consumed.
      - As the quantity consumed of a good increases, the marginal utility from it decreases.
      - We call this decrease in marginal utility as the quantity of the good consumed increases the principle of diminishing marginal utility.
      - Marginal utility from a good decreases as the quantity of the good increases
      - Total utility from pop increases as more pop is consumed.
- - - - Consumption Possibilities are all the things that you can afford to buy
        
        A Consumer’s Budget Line: Consumption possibilities are limited by income, the price of a movie, and the price of pop. When Lisa spends all of her income, she reaches the limits of her consumption possibilities. Lisa’s budget line shows the limits of her consumption possibilities.
        
        • A point inside the budget line A (affordable, and you’re saving), point B on the budget line is (affordable but no income left), Point C is outside of the budget line, it’s unaffordable. (points ABC consumption bundles)
        
        • Budget line: P1 = $20 X1; P2 = $5 X2; m=$100 20xX1+5X2= 100
        
        m over Py =Y-intercept: real income in terms of Y
        
        m over Px = X-intercept: real income in terms of
        
        -Px over Py = Slope: the relative price of X in terms of Y
        
        • Budget line is downward sloping because income is limited.
    - - The choice that Lisa makes depends on her preferences—her likes and dislikes.
    - - the total benefit that a person gets from the consumption of all the different goods and services.
        Total utility depends on the level of consumption-more consumption generally gives total utility.
      - marginal utility
        
        we define marginal utility as the change in total utility that results from a one-unit increase in the quantity of a good consumed.
        
        Positive marginal utility
        
        The things that people enjoy and want more of have a positive marginal utility.Some objects and activities can generate negative marginal utility and lower total utility.
        
        Diminishing marginal Utiliy
        
        The tendency of marginal utility to decrease as the consumption of a good increase is so general and universal that we give it the status of a parinciple.
- - - - if the price of a movie falls, we know that MUM/PM rises, so before the consumer changes the quantities bought, MUM/PM > MUP/PP