Chapter 19 - Theory of consumer behavior. The main contents of this chapter include all of the following: Marginal utility, the law of diminishing returns, total utility, maximizing utility, the water-diamond paradox, consumer surplus. | Chapter 19 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 19-1 Theory of Consumer Behavior Chapter Objectives Marginal utility The law of diminishing returns Total utility Maximizing utility The water-diamond paradox Consumer surplus 19-2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Utility What is utility? Utility is NOT usefulness! Utility means only that you think enough of something to buy it Utility is measured by how much you are willing to pay for something 19-3 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Hypothetical Demand Schedule for Hamburgers Price Purchased $ 1 Units 19-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Hypothetical Demand Schedule for Hamburgers Price Purchased $ 1 2 Units 19-5 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Hypothetical Demand Schedule for Hamburgers Price Purchased $ 1 2 3 Units 19-6 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Hypothetical Demand Schedule for Hamburgers Price Purchased $ 1 2 3 .25 4 Units 19-7 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Price Purchased MU $ 1 $ 2 3 .25 4 .25 Marginal Utility is the additional utility derived from consuming one more unit of a good or service Units 19-8 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Price Purchased MU $ 1 $ 2 3 .25 4 .25 Marginal Utility is the additional utility derived from consuming one more unit of a good or service Note: Marginal Utility is the same as the price. 19-9 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Price Purchased MU $ 1 $ 2 3 .25 4 .25 Law of Diminishing Marginal Utility: As we consume more and more of a good or service,we like it less and less Units 19-10 Copyright 2002 by . | Chapter 19 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 19-1 Theory of Consumer Behavior Chapter Objectives Marginal utility The law of diminishing returns Total utility Maximizing utility The water-diamond paradox Consumer surplus 19-2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Utility What is utility? Utility is NOT usefulness! Utility means only that you think enough of something to buy it Utility is measured by how much you are willing to pay for something 19-3 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Hypothetical Demand Schedule for Hamburgers Price Purchased $ 1 Units 19-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Hypothetical Demand Schedule for Hamburgers Price Purchased $ 1 2 Units 19-5 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Hypothetical Demand Schedule for Hamburgers Price Purchased $ 1 2 3 Units 19-6
