Demand and consumer behavior.

1. Ms.May AndreaS.FranciaBSEd-I
September1,2015
Demand and Consumer Behavior
Choice and utility theory.
Utility
Denotes satisfaction.
Marginal Utility
The increment to your utility.
Denotes the additional utility you get from the consumption of an additional unit of a
commodity.
Law of Diminishing Marginal Utility
States that the amount of extra or marginal utility declines as a person consumes more
and more of a good.
Equimarginal Utility
The fundamental configure of maximum satisfaction or utility.
States that a consumer having income and facing given market or utility when the
marginal utility of the last dollar spent on each good is exactly the same as the marginal
utility of the last dollar spent on any other good.
Marginal Utility of Income
The common marginal utility per dollar of all commodities in consumer equilibrium.
If measures the additional utility that would be gained if the consumer could enjoy an
extra dollars worth of consumption.
Ordinal Utility
Economists today generally reject the nation of a cardinal, measureable utility that is
attached to consumption of ordinary goods like shoes or pasta.
Function representing the preferences of an agent on an ordinal scale.
Complements
An increase in the price of a good A causes a decrease in the demand for its
complementary good B.
Merit Goods
Those goods and services that the government feels that people will under-consume, and
which ought to be subsidized or provided free at the point of use so that consumption
does not depend primarily on the ability to pay for the good or service.
Demerit Goods
A good or service whose consumption is considered unhealthy, degrading, or otherwise
socially undesirable due to the perceived negative effects on the consumers themselves. It
is over-consumed if left to market forces.
The Paradox of Value
By Adam Smith

2. Ms.May AndreaS.FranciaBSEd-I
September1,2015
Nothing is more than water, but it will scarce purchase anything. A diamond on the
contrary, how scarce any value is use, but a very quantity after goods may frequently be
than in exchange for it.
Consumer Surplus
The gap between the total utility of a good and its total market value.