This document discusses key concepts in consumer behavior theory including utility, marginal utility, total utility, and how consumers aim to maximize their total utility. It explains that while utility increases with consumption, marginal utility decreases after a certain point. The document also briefly covers the water-diamond paradox and the concept of consumer surplus.

1. CONSUMER
BEHAVIOR

2. Utility
 It is a hypothetical concept rather than a
certain measure
 Is the total satisfaction received from
consuming a good or service.

3. Marginal Utility
 Is the additional satisfaction or amount of utility
gained from each extra unit of consumption
although generally, utility increases as more of
a good is consumed. However, marginal utility
decreases with each additional increase in
consumption of a good.

4. Total Utility
 Total Utility is the aggregate sum of
satisfaction gained from consuming a given
amount of goods. This could be calculated
through adding the marginal utilities of all the
units purchased.
Chocolate Bars
Eaten
Marginal Utility Total Utility
1 70 70
2 40 110
3 10 120
4 5 125

5. Maximizing Utility
 Utility maximization is a hypothesis explaining
consumer behavior with consumer demand
theory and utility analysis.
 Economists assume the consumer is rational
and will thus maximize his or her total utility by
purchasing a combination of different products
rather than more of one particular product.

6. The Water-Diamond Paradox
 The Diamond-Water Paradox, also known as
the Paradox of Value, is a famous
contradiction that has been argued for long by
Economists. Coined by Adam Smith, the
paradox points out a rather strange but usual
anomaly that water, despite being life-
essential, has a very low market value;
whereas diamond, having little usefulness in
our daily lives, is very costly

7. Consumer Surplus
 Consumer surplus is an economic measure of
consumer satisfaction or utility. It is calculated
by analyzing the difference between what
consumers pay for a good and how much he is
willing to pay for that.