Utility (Structure)

Question 1

Shape of demand curve

Answer 1

• Define Law of diminshing marginal utility
• Give an example from the date/tables
• Define optimum rule
• Give an example from the date/tables
• Link the law diminshing marginal utility and optimum rule together (eg. Because of the law diminshing marginal utility and optimum rule, for (name) to purchase one more good (example) they would require the price to fall to match their marginal utility - price decrease to $x to match marginal utility x utilis)
• This is the reason the demand curve is downard slopping (inverse relationship with price). The law of demand states as the price of a good increase quanity demand decrase, vice verse, certis paribus.

Question 2

Consumer equlibrium/marginal rule

Answer 2

• State the Consumer equlibrium/marginal rule
• State conditions and fomula
• In this situation consumer equilibrium is achived becuase the marignal utility of the last dollar sepnt on each good or service is equal. This allows the customer to achive maximum total satisfaction
• Calculate total cost for both options
• State which option is best and why not the other one - is it over or under the budget
• Calculate total utility for both options
• The correct option would have the highest utility- how much is greater by… is there for the best combintation to achive macimaumu total utility.