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TOPICS
- diminishing marginal
utility
- utility maximization
OUTCOMES
Define, Draw, and
Describe the total utility and marginal utility
graphs
Understand the relationship
between the total utility and marginal utility
graphs
Understand the law of diminishing
marginal utility.
Describe how rational consumers
maximize utility by using benefit-cost-analysis. (Utility
maximizing rule; MUx/Px = MUy/Py = MUz/Pz
)
Explain how a demand curve can be
derived by observing the outcomes of price changes in the
utility-maximization model
If lobster was free and if lobster
was your favorite food, would you eat lobster for every
meal everyday? Why or why not?
Why do pop vending machines allow
you to only get one can at a time while newspaper vending
machines allow you to take as many as you want when you
only pay for one?
Why do we have to divide by price
in the utility maximizing rule?
- Benefit Cost
Analysis: MB = MC
- Utility Maximizing Rule: MUa/Pa = MUb/Pb
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