It can not be a financial asset, it much be an actual good.
Estimate price on board
What if Warren Buffett is
too busy to go shopping
so he gives you the cash.
Would you still buy the one good?
Why or why not?
Does money always increase utility? Many goods vs. few
or one for consumers
Ted.org video clip
Consumers attempt to maximize their utility based on
their budget constraint
Theory of consumer
People face tradeoffs
People choose based on
Rules of I.C.’s:
1. Higher the better
2. Downward sloping
3. I.C.’s do not cross “More
goods are better”
4. Bowed inward “MRS
gets smaller as you
Factors of change:
Why can’t we buy all the goods
indifference curve is
tangent to budget
Calculating Utility Maximization
Use calculus to find tangency of indifference curve
against the budget constraint
Use easy formula
To obtain the greatest utility the consumer should
allocate money income so that the last dollar spent on
each good or service yields the same marginal utility.
A consumer can buy oranges or apples
A consumer wants $10 to spend on fruit at the farmers
A consumer prefers oranges to apples
How can this consumer maximize their utility?