Consumer Demand and Utility Theory Flashcards
1
Q
What is utility theory?
A
Measurement of satisfaction derived from the acquisition of a good or service
This is HIGHLY theoretical
2
Q
How is the utility theory measured?
A
Measured in a HYPOTHETICAL UNIT CALLED A “UTIL”
3
Q
What is total utility (TU)
A
Increases with quantity acquired
4
Q
What is marginal utility (MU)
A
Decreases with quantity acquired
5
Q
What is maximize total utility?
A
Where last dollar spent on every on every commodity acquired gives same MU
