This document discusses the law of diminishing marginal utility. It explains that as consumption of a good increases, the marginal utility obtained from each additional unit decreases. This law explains the downward sloping demand curve. The document also covers total utility, marginal utility, consumer equilibrium, deriving the demand curve, and applications like income and substitution effects. Prospect theory and how people judge gains and losses is also summarized.
Near substitutes of fresh fruit and vegetables FoodBOS
Frozen fruit and vegetables were identified as near substitutes for fresh produce by CEOs and GMs interviewed. Six executives highlighted frozen products as alternatives for end-consumers when fresh fruit and vegetables are not available. Frozen produce provides substitutes that retain much of the nutritional value of fresh options.
This document provides an overview of key concepts related to household behavior and consumer choice, including:
1) Households face budget constraints determined by income, prices, and wealth that define their set of affordable consumption options.
2) Utility maximization theory holds that households make choices to maximize total satisfaction given these constraints. The law of diminishing marginal utility explains why demand curves slope downward.
3) When prices change, households experience both substitution effects as relative prices alter what is affordable, as well as income effects as purchasing power changes with price fluctuations.
The document discusses factors that influence consumer behavior, including cultural, social, and psychological factors. It examines how culture, social class, reference groups, family, demographics, and location impact purchasing decisions. Additionally, it analyzes psychological influences such as perception, learning, motivation, attitudes, and lifestyles that shape consumer behavior. The consumer decision-making process involves need recognition, information search, evaluation of alternatives, purchase, and post-purchase evaluation.
The document discusses consumer behavior and advertising strategies used by companies. It explains that consumer behavior research attempts to understand how and why people make purchasing decisions. Companies use advertising to influence consumer attitudes and persuade people to buy their products. The document provides examples of advertising budgets for companies like Microsoft, Coca-Cola, and Starbucks. It also outlines strategies used by companies like Cadbury and Bournvita to target different consumer groups and understand their motivations. Qualitative and quantitative research methods are discussed for studying consumer behavior.
A presentation entitled Impact of Online and Television Advertising on Consumer Behavior, was given at the Advertising Research Foundation’s (ARF) AM 6.0 conference held in 2011. The presentation includes, the challenges to measuring cross-platform media impacts, comscore methods, case studies and results. Presenters included Joan FitzGerald-Vice President of comScore & Alan Vaughn- Statistical Analyst at comScore.
The document discusses consumer behavior and the factors that influence it. It defines consumer behavior as the study of how people buy products, what they buy, why they buy, and when they buy. It identifies the main factors that affect consumer behavior as cultural and social influences like culture, social class, and family, as well as psychological influences like perception, learning, motivation, attitudes, and lifestyles. The document also outlines the buyer decision process and key concepts around target audiences and consumer demographics.
The document discusses four stages of consumer decision making: 1) need recognition, 2) information search and alternative evaluation, 3) purchase, and 4) post-purchase use and evaluation. It also discusses factors that influence consumer behavior such as culture, social class, and gender roles. The key stages involve recognizing a need, gathering internal and external information on alternatives, selecting from awareness sets to consideration sets to choice sets, and finally making a purchase decision.
1) Consumer psychology deals with activities involved in selecting, obtaining, and using products and services to satisfy needs and desires, including decision processes before and after purchase.
2) Consumer behavior is the study of buying units and exchange processes involved in acquiring, consuming, and disposing of goods, services, experiences, and ideas.
3) Theories of consumer behavior development include the rational choice theory, opportunity set/budget constraint theory, and preference ordering theory. External factors like demographics, economics, and social influences also impact consumer decisions.
Near substitutes of fresh fruit and vegetables FoodBOS
Frozen fruit and vegetables were identified as near substitutes for fresh produce by CEOs and GMs interviewed. Six executives highlighted frozen products as alternatives for end-consumers when fresh fruit and vegetables are not available. Frozen produce provides substitutes that retain much of the nutritional value of fresh options.
This document provides an overview of key concepts related to household behavior and consumer choice, including:
1) Households face budget constraints determined by income, prices, and wealth that define their set of affordable consumption options.
2) Utility maximization theory holds that households make choices to maximize total satisfaction given these constraints. The law of diminishing marginal utility explains why demand curves slope downward.
3) When prices change, households experience both substitution effects as relative prices alter what is affordable, as well as income effects as purchasing power changes with price fluctuations.
The document discusses factors that influence consumer behavior, including cultural, social, and psychological factors. It examines how culture, social class, reference groups, family, demographics, and location impact purchasing decisions. Additionally, it analyzes psychological influences such as perception, learning, motivation, attitudes, and lifestyles that shape consumer behavior. The consumer decision-making process involves need recognition, information search, evaluation of alternatives, purchase, and post-purchase evaluation.
The document discusses consumer behavior and advertising strategies used by companies. It explains that consumer behavior research attempts to understand how and why people make purchasing decisions. Companies use advertising to influence consumer attitudes and persuade people to buy their products. The document provides examples of advertising budgets for companies like Microsoft, Coca-Cola, and Starbucks. It also outlines strategies used by companies like Cadbury and Bournvita to target different consumer groups and understand their motivations. Qualitative and quantitative research methods are discussed for studying consumer behavior.
A presentation entitled Impact of Online and Television Advertising on Consumer Behavior, was given at the Advertising Research Foundation’s (ARF) AM 6.0 conference held in 2011. The presentation includes, the challenges to measuring cross-platform media impacts, comscore methods, case studies and results. Presenters included Joan FitzGerald-Vice President of comScore & Alan Vaughn- Statistical Analyst at comScore.
The document discusses consumer behavior and the factors that influence it. It defines consumer behavior as the study of how people buy products, what they buy, why they buy, and when they buy. It identifies the main factors that affect consumer behavior as cultural and social influences like culture, social class, and family, as well as psychological influences like perception, learning, motivation, attitudes, and lifestyles. The document also outlines the buyer decision process and key concepts around target audiences and consumer demographics.
The document discusses four stages of consumer decision making: 1) need recognition, 2) information search and alternative evaluation, 3) purchase, and 4) post-purchase use and evaluation. It also discusses factors that influence consumer behavior such as culture, social class, and gender roles. The key stages involve recognizing a need, gathering internal and external information on alternatives, selecting from awareness sets to consideration sets to choice sets, and finally making a purchase decision.
1) Consumer psychology deals with activities involved in selecting, obtaining, and using products and services to satisfy needs and desires, including decision processes before and after purchase.
2) Consumer behavior is the study of buying units and exchange processes involved in acquiring, consuming, and disposing of goods, services, experiences, and ideas.
3) Theories of consumer behavior development include the rational choice theory, opportunity set/budget constraint theory, and preference ordering theory. External factors like demographics, economics, and social influences also impact consumer decisions.
This document summarizes concepts related to utility maximization and consumer choice theory. It discusses how consumers aim to maximize their total utility subject to a budget constraint by consuming goods until the marginal utility per dollar is equal between goods. When the price of a good changes, it impacts the consumer's optimal choice through substitution and income effects. Utility maximization can help explain various economic behaviors and decisions including demand curves, new product adoption, and even criminal behavior.
This document summarizes key concepts from Chapter 7 on utility maximization and consumer behavior. It discusses:
1) The concepts of total utility, marginal utility, and the law of diminishing marginal utility. Consumers seek to maximize total utility subject to their budget.
2) How consumers allocate their budget between goods to equalize marginal utility per dollar spent. This results in the utility-maximizing combination.
3) How changes in prices result in income and substitution effects, causing movement along the demand curve and shifts in the demand curve.
Utility - Concept and Types - Law of Diminishing Marginal Utility - Assumptio...Mohammed Jasir PV
This document discusses the concept of utility and the law of diminishing marginal utility. It defines utility as the want-satisfying capacity of a product or the level of satisfaction obtained. There are two approaches to measuring utility - cardinal utility which quantifies utility and ordinal utility which ranks preferences. The law of diminishing marginal utility states that as consumption of a good increases, the marginal utility obtained from each additional unit decreases. It provides an example table showing how total utility increases at a diminishing rate as marginal utility falls with more consumption. The law is based on assumptions like utility being measurable and consumption being of uniform, continuous units of a good. It explains economic concepts like demand, pricing and progressive taxation. Rare goods, money and fashion
This document summarizes key concepts in consumer behavior and utility analysis:
- It outlines consumer behavior, total utility, marginal utility, and cardinal and ordinal utility analysis.
- It explains the law of diminishing marginal utility using an example schedule. As consumption increases, marginal utility decreases while total utility initially increases but at a decreasing rate.
- It also explains the law of equi-marginal utility, which states that total utility is maximized when the marginal utility per unit of expenditure is equal across goods, given a consumer's budget. An example schedule demonstrates this.
- The document notes some assumptions and limitations of these economic laws and concepts.
The document summarizes key concepts from consumer choice theory in economics. It discusses the concepts of utility, total utility, marginal utility, diminishing marginal utility, and consumer equilibrium. It explains that consumer equilibrium occurs when the marginal utility per dollar is equal for all goods purchased. This can be used to derive the downward-sloping demand curve, as when price falls, consumption increases to restore equilibrium. The income and substitution effects are also summarized as complementary explanations for the law of demand. When price decreases, these effects work together to increase the quantity demanded.
This document summarizes key concepts related to marginal utility and consumer choice. It defines marginal utility as the additional satisfaction gained from consuming one more unit of a good. The law of diminishing marginal utility states that marginal utility declines as consumption increases. A rational consumer seeks to maximize total utility by equalizing the marginal utility per dollar spent (MU/P ratio) on each good. When price decreases, quantity demanded increases as MU/P rises. The marginal utility approach explains consumer demand and the creation of consumer surplus from market transactions. While exact comparisons of utility across individuals are not possible, approximate comparisons are necessary to evaluate some economic policies.
This chapter discusses consumer demand and the factors that influence it. It covers the sociopsychological and economic explanations for consumption behaviors. The key determinants of demand are tastes, income, prices, expectations, number of consumers and other goods. The chapter also explains the concepts of total utility, marginal utility, and the law of diminishing marginal utility. It introduces the law of demand and illustrates demand curves. Finally, it discusses the measurement of price elasticity, factors that influence elasticity like necessity vs luxury goods and availability of substitutes, and the relationship between elasticity and total revenue.
Chapter 2 law of diminshing marginal utilitybapububul2012
The document discusses key concepts in consumption including utility, marginal utility, total utility, the law of diminishing utility, and the law of equi-marginal utility. It explains that utility refers to the satisfaction derived from consuming a good and that marginal utility diminishes with increasing consumption of a good. The law of equi-marginal utility states that rational consumers will allocate their budget in such a way that the marginal utility per unit of expenditure is equal across all goods consumed. The document also notes criticisms of these laws given the subjective nature of utility.
This document discusses key concepts in consumer theory, including utility, cardinal and ordinal utility, marginal utility, total utility, the law of diminishing marginal utility, and the law of equi-marginal utility. Utility refers to the satisfaction derived from consuming a good and is subjective in nature. The law of diminishing marginal utility states that the marginal utility derived from additional units of consumption decreases as consumption increases. The law of equi-marginal utility holds that consumers allocate their budget in a way that equalizes the marginal utility across goods consumed to maximize total utility.
1. Utility theory includes the law of diminishing marginal utility and the law of equi-marginal utility. The law of diminishing marginal utility states that the marginal utility of consuming successive units of a good decreases as consumption increases.
2. Marginal utility refers to the satisfaction gained from consuming an additional unit of a good. It decreases with increasing consumption as wants are satisfied. The total utility initially increases with consumption but eventually reaches a point where marginal utility is zero and additional units provide no added satisfaction.
3. An example of diminishing marginal utility is drinking water when thirsty. The first glass provides the most satisfaction while additional glasses provide less satisfaction until the point where more water would provide disutility rather than
1. Utility theory includes the law of diminishing marginal utility and the law of equi-marginal utility. The law of diminishing marginal utility states that the marginal utility of consuming successive units of a good decreases as consumption increases.
2. Marginal utility refers to the satisfaction gained from consuming an additional unit of a good. It decreases with increasing consumption as wants are satisfied. The total utility initially increases with consumption but eventually reaches a point where marginal utility is zero and additional units provide no added satisfaction.
3. An example of diminishing marginal utility is drinking water when thirsty. The first glass provides the most satisfaction while additional glasses provide less satisfaction until the point where more water would provide disutility rather than
This document provides an overview of key economic concepts covered in Chapter 1, including:
- Scarcity and the fact that economic wants exceed productive capacity, requiring choices between unlimited wants and scarce resources.
- Opportunity cost and how it relates to rational decision making in light of costs and benefits.
- Microeconomics focuses on individual decision making units while macroeconomics looks at aggregate outcomes.
- Production possibilities frontiers and opportunity cost curves illustrate scarcity and tradeoffs between different goods at different levels of production.
- Economic growth can shift production possibility frontiers outward by increasing available resources and improving technology.
Microeconomics_11_Public Goods and Externalities.pptxGelMiAmor
Public goods and externalities can cause markets to fail to allocate resources efficiently. Goods with positive externalities are underprovided by markets, while goods with negative externalities like pollution are overproduced. Government intervention may be needed to address these market failures. Some options include command-and-control regulation, pollution taxes, and marketable permits. These policies aim to incentivize behaviors that account for social costs and benefits rather than just private costs and benefits.
The document discusses consumer choice and utility analysis. It covers key concepts such as:
- Utility is the satisfaction derived from consumption and is subjective.
- Total utility increases with consumption but at a decreasing rate due to the law of diminishing marginal utility.
- Consumers aim to maximize utility given budget constraints. They allocate spending such that the marginal utility per rupee is equal for all goods consumed.
- Indifference curves illustrate combinations of goods that provide the same utility level. Utility is maximized at the point of tangency between the indifference curve and budget line.
- A reduction in price causes a substitution effect as consumers alter consumption along their original indifference curve, and an income effect as their
This document discusses microeconomics and consumer behavior topics including utility maximization, demand, and consumer choice. It defines key concepts like total utility, marginal utility, and the law of diminishing marginal utility. It provides examples to illustrate these concepts and how consumers make choices to maximize their utility subject to budget constraints. Rational consumers will allocate their limited income between goods in a way that equalizes the marginal utility per dollar between each good. The document also discusses substitution and income effects that occur when prices change.
Utility refers to the satisfaction or benefit derived from consuming a good. The law of diminishing marginal utility states that as consumption of a good increases, the marginal utility of each additional unit decreases. The law of equi-marginal utility extends this to consumption of multiple goods, stating that a consumer will allocate their budget in a way that equalizes the marginal utility across goods. This occurs when a consumer spends their money in a way that maximizes total utility subject to their budget constraint.
Group A members for the consumer behaviour project are Amana Shahid and Zahra Jamshaid. The document discusses the cardinal approach to consumer behavior, which aims to quantify utility. It defines key concepts like total utility, marginal utility, and the laws of diminishing marginal utility and equi-marginal utility. An example is given to illustrate how the marginal utility of consuming successive units of a good like water decreases as consumption increases.
This document provides an overview of key concepts in consumer choice theory and utility maximization. It defines key terms like utility, total utility, marginal utility, and the law of diminishing marginal utility. It explains that consumers seek to maximize total utility subject to a budget constraint by allocating spending so that the marginal utility per dollar is equal across goods, known as consumer equilibrium. It also discusses the income and substitution effects that explain how changes in price result in changes to the quantity demanded in accordance with the law of demand.
The document discusses the concept of utility in economics. It defines utility as the satisfaction derived by a consumer from consuming a good or service. It then discusses:
1) The law of diminishing marginal utility, which states that as a consumer consumes more of a good, the marginal utility of each additional unit decreases.
2) The different types of utility - total utility, marginal utility, initial utility, zero utility, and negative utility. It provides an example to illustrate these concepts.
3) The characteristics, classifications, and types of utility, including form utility, place utility, time utility, and service utility. It also discusses the cardinal and ordinal approaches to measuring utility.
This document discusses the economic concept of diminishing marginal utility. It defines utility as satisfaction from consuming a good, and marginal utility as the change in utility from consuming an additional unit of a good. The law of diminishing marginal utility states that the marginal utility of a good declines as consumption increases. Total utility still increases if marginal utility remains positive. The document uses an example of consuming slices of pizza to illustrate total and marginal utility. It also discusses the diamond-water paradox and how value in use differs from value in exchange.
The document discusses concepts related to national trade and the economy including money, functions of money, kinds of money, monetary standards, commodity standards, fiat standards, the quantity theory of money, monetary policy, fiscal policy, government debt, budget deficits, measuring national income using GDP, GNP, expenditure approach, income approach, and other related national accounts. It provides definitions and explanations of these key economic terms and concepts.
Controlling consists of verifying whether everything occurs in conformities with the plans adopted, instructions issued and principles established. Controlling ensures that there is effective and efficient utilization of organizational resources so as to achieve the planned goals. Controlling measures the deviation of actual performance from the standard performance, discovers the causes of such deviations and helps in taking corrective actions.
This document summarizes concepts related to utility maximization and consumer choice theory. It discusses how consumers aim to maximize their total utility subject to a budget constraint by consuming goods until the marginal utility per dollar is equal between goods. When the price of a good changes, it impacts the consumer's optimal choice through substitution and income effects. Utility maximization can help explain various economic behaviors and decisions including demand curves, new product adoption, and even criminal behavior.
This document summarizes key concepts from Chapter 7 on utility maximization and consumer behavior. It discusses:
1) The concepts of total utility, marginal utility, and the law of diminishing marginal utility. Consumers seek to maximize total utility subject to their budget.
2) How consumers allocate their budget between goods to equalize marginal utility per dollar spent. This results in the utility-maximizing combination.
3) How changes in prices result in income and substitution effects, causing movement along the demand curve and shifts in the demand curve.
Utility - Concept and Types - Law of Diminishing Marginal Utility - Assumptio...Mohammed Jasir PV
This document discusses the concept of utility and the law of diminishing marginal utility. It defines utility as the want-satisfying capacity of a product or the level of satisfaction obtained. There are two approaches to measuring utility - cardinal utility which quantifies utility and ordinal utility which ranks preferences. The law of diminishing marginal utility states that as consumption of a good increases, the marginal utility obtained from each additional unit decreases. It provides an example table showing how total utility increases at a diminishing rate as marginal utility falls with more consumption. The law is based on assumptions like utility being measurable and consumption being of uniform, continuous units of a good. It explains economic concepts like demand, pricing and progressive taxation. Rare goods, money and fashion
This document summarizes key concepts in consumer behavior and utility analysis:
- It outlines consumer behavior, total utility, marginal utility, and cardinal and ordinal utility analysis.
- It explains the law of diminishing marginal utility using an example schedule. As consumption increases, marginal utility decreases while total utility initially increases but at a decreasing rate.
- It also explains the law of equi-marginal utility, which states that total utility is maximized when the marginal utility per unit of expenditure is equal across goods, given a consumer's budget. An example schedule demonstrates this.
- The document notes some assumptions and limitations of these economic laws and concepts.
The document summarizes key concepts from consumer choice theory in economics. It discusses the concepts of utility, total utility, marginal utility, diminishing marginal utility, and consumer equilibrium. It explains that consumer equilibrium occurs when the marginal utility per dollar is equal for all goods purchased. This can be used to derive the downward-sloping demand curve, as when price falls, consumption increases to restore equilibrium. The income and substitution effects are also summarized as complementary explanations for the law of demand. When price decreases, these effects work together to increase the quantity demanded.
This document summarizes key concepts related to marginal utility and consumer choice. It defines marginal utility as the additional satisfaction gained from consuming one more unit of a good. The law of diminishing marginal utility states that marginal utility declines as consumption increases. A rational consumer seeks to maximize total utility by equalizing the marginal utility per dollar spent (MU/P ratio) on each good. When price decreases, quantity demanded increases as MU/P rises. The marginal utility approach explains consumer demand and the creation of consumer surplus from market transactions. While exact comparisons of utility across individuals are not possible, approximate comparisons are necessary to evaluate some economic policies.
This chapter discusses consumer demand and the factors that influence it. It covers the sociopsychological and economic explanations for consumption behaviors. The key determinants of demand are tastes, income, prices, expectations, number of consumers and other goods. The chapter also explains the concepts of total utility, marginal utility, and the law of diminishing marginal utility. It introduces the law of demand and illustrates demand curves. Finally, it discusses the measurement of price elasticity, factors that influence elasticity like necessity vs luxury goods and availability of substitutes, and the relationship between elasticity and total revenue.
Chapter 2 law of diminshing marginal utilitybapububul2012
The document discusses key concepts in consumption including utility, marginal utility, total utility, the law of diminishing utility, and the law of equi-marginal utility. It explains that utility refers to the satisfaction derived from consuming a good and that marginal utility diminishes with increasing consumption of a good. The law of equi-marginal utility states that rational consumers will allocate their budget in such a way that the marginal utility per unit of expenditure is equal across all goods consumed. The document also notes criticisms of these laws given the subjective nature of utility.
This document discusses key concepts in consumer theory, including utility, cardinal and ordinal utility, marginal utility, total utility, the law of diminishing marginal utility, and the law of equi-marginal utility. Utility refers to the satisfaction derived from consuming a good and is subjective in nature. The law of diminishing marginal utility states that the marginal utility derived from additional units of consumption decreases as consumption increases. The law of equi-marginal utility holds that consumers allocate their budget in a way that equalizes the marginal utility across goods consumed to maximize total utility.
1. Utility theory includes the law of diminishing marginal utility and the law of equi-marginal utility. The law of diminishing marginal utility states that the marginal utility of consuming successive units of a good decreases as consumption increases.
2. Marginal utility refers to the satisfaction gained from consuming an additional unit of a good. It decreases with increasing consumption as wants are satisfied. The total utility initially increases with consumption but eventually reaches a point where marginal utility is zero and additional units provide no added satisfaction.
3. An example of diminishing marginal utility is drinking water when thirsty. The first glass provides the most satisfaction while additional glasses provide less satisfaction until the point where more water would provide disutility rather than
1. Utility theory includes the law of diminishing marginal utility and the law of equi-marginal utility. The law of diminishing marginal utility states that the marginal utility of consuming successive units of a good decreases as consumption increases.
2. Marginal utility refers to the satisfaction gained from consuming an additional unit of a good. It decreases with increasing consumption as wants are satisfied. The total utility initially increases with consumption but eventually reaches a point where marginal utility is zero and additional units provide no added satisfaction.
3. An example of diminishing marginal utility is drinking water when thirsty. The first glass provides the most satisfaction while additional glasses provide less satisfaction until the point where more water would provide disutility rather than
This document provides an overview of key economic concepts covered in Chapter 1, including:
- Scarcity and the fact that economic wants exceed productive capacity, requiring choices between unlimited wants and scarce resources.
- Opportunity cost and how it relates to rational decision making in light of costs and benefits.
- Microeconomics focuses on individual decision making units while macroeconomics looks at aggregate outcomes.
- Production possibilities frontiers and opportunity cost curves illustrate scarcity and tradeoffs between different goods at different levels of production.
- Economic growth can shift production possibility frontiers outward by increasing available resources and improving technology.
Microeconomics_11_Public Goods and Externalities.pptxGelMiAmor
Public goods and externalities can cause markets to fail to allocate resources efficiently. Goods with positive externalities are underprovided by markets, while goods with negative externalities like pollution are overproduced. Government intervention may be needed to address these market failures. Some options include command-and-control regulation, pollution taxes, and marketable permits. These policies aim to incentivize behaviors that account for social costs and benefits rather than just private costs and benefits.
The document discusses consumer choice and utility analysis. It covers key concepts such as:
- Utility is the satisfaction derived from consumption and is subjective.
- Total utility increases with consumption but at a decreasing rate due to the law of diminishing marginal utility.
- Consumers aim to maximize utility given budget constraints. They allocate spending such that the marginal utility per rupee is equal for all goods consumed.
- Indifference curves illustrate combinations of goods that provide the same utility level. Utility is maximized at the point of tangency between the indifference curve and budget line.
- A reduction in price causes a substitution effect as consumers alter consumption along their original indifference curve, and an income effect as their
This document discusses microeconomics and consumer behavior topics including utility maximization, demand, and consumer choice. It defines key concepts like total utility, marginal utility, and the law of diminishing marginal utility. It provides examples to illustrate these concepts and how consumers make choices to maximize their utility subject to budget constraints. Rational consumers will allocate their limited income between goods in a way that equalizes the marginal utility per dollar between each good. The document also discusses substitution and income effects that occur when prices change.
Utility refers to the satisfaction or benefit derived from consuming a good. The law of diminishing marginal utility states that as consumption of a good increases, the marginal utility of each additional unit decreases. The law of equi-marginal utility extends this to consumption of multiple goods, stating that a consumer will allocate their budget in a way that equalizes the marginal utility across goods. This occurs when a consumer spends their money in a way that maximizes total utility subject to their budget constraint.
Group A members for the consumer behaviour project are Amana Shahid and Zahra Jamshaid. The document discusses the cardinal approach to consumer behavior, which aims to quantify utility. It defines key concepts like total utility, marginal utility, and the laws of diminishing marginal utility and equi-marginal utility. An example is given to illustrate how the marginal utility of consuming successive units of a good like water decreases as consumption increases.
This document provides an overview of key concepts in consumer choice theory and utility maximization. It defines key terms like utility, total utility, marginal utility, and the law of diminishing marginal utility. It explains that consumers seek to maximize total utility subject to a budget constraint by allocating spending so that the marginal utility per dollar is equal across goods, known as consumer equilibrium. It also discusses the income and substitution effects that explain how changes in price result in changes to the quantity demanded in accordance with the law of demand.
The document discusses the concept of utility in economics. It defines utility as the satisfaction derived by a consumer from consuming a good or service. It then discusses:
1) The law of diminishing marginal utility, which states that as a consumer consumes more of a good, the marginal utility of each additional unit decreases.
2) The different types of utility - total utility, marginal utility, initial utility, zero utility, and negative utility. It provides an example to illustrate these concepts.
3) The characteristics, classifications, and types of utility, including form utility, place utility, time utility, and service utility. It also discusses the cardinal and ordinal approaches to measuring utility.
This document discusses the economic concept of diminishing marginal utility. It defines utility as satisfaction from consuming a good, and marginal utility as the change in utility from consuming an additional unit of a good. The law of diminishing marginal utility states that the marginal utility of a good declines as consumption increases. Total utility still increases if marginal utility remains positive. The document uses an example of consuming slices of pizza to illustrate total and marginal utility. It also discusses the diamond-water paradox and how value in use differs from value in exchange.
The document discusses concepts related to national trade and the economy including money, functions of money, kinds of money, monetary standards, commodity standards, fiat standards, the quantity theory of money, monetary policy, fiscal policy, government debt, budget deficits, measuring national income using GDP, GNP, expenditure approach, income approach, and other related national accounts. It provides definitions and explanations of these key economic terms and concepts.
Controlling consists of verifying whether everything occurs in conformities with the plans adopted, instructions issued and principles established. Controlling ensures that there is effective and efficient utilization of organizational resources so as to achieve the planned goals. Controlling measures the deviation of actual performance from the standard performance, discovers the causes of such deviations and helps in taking corrective actions.
This document provides an overview of principles of management related to leading and motivation. It defines leading as influencing people to contribute to goals, and motivation as energizing directed and sustained effort toward goals. Key motivation theories are discussed, including Maslow's hierarchy of needs, McGregor's Theory X/Y, Herzberg's two-factor theory, and McClelland's three needs theory. Leadership is defined as influencing willing enthusiasm toward goals. Different leadership styles like charismatic, contingent, and path-goal theories are outlined. The difference between leaders and managers is that leaders have followers while managers have employees working for them.
Price elasticity of demand (PED) shows the relationship between price and quantity demanded and provides a precise calculation of the effect of a change in price on quantity demanded.
In economics, a model is a theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified framework designed to illustrate complex processes, often but not always using mathematical techniques. Frequently, economic models posit structural parameters. Structural parameters are underlying parameters in a model or class of models. A model may have various parameters and those parameters may change to create various properties. Methodological uses of models include investigation, theorizing, and fitting theories to the world.
The document provides guidance on creating an effective business plan for starting a new venture. It discusses that a business plan should include an introductory section, executive summary, company description, market analysis, competitive analysis, operation plan, management team, and financial projections. The business plan is an important tool that provides structure and guidelines for the business, and helps determine viability, obtain financing, and familiarize others with the venture's goals and objectives. An effective plan requires research and clarity on all relevant internal and external elements of the business.
THE ENTREPRENEURIAL AND INTRAPRENEURIAL MINDFallahchay Ali
This document discusses the entrepreneurial process and intrapreneurship. It defines the four phases of the entrepreneurial process as identifying and evaluating opportunities, developing a business plan, determining required resources, and managing the enterprise. It also outlines the differences between entrepreneurial and managerial decision making. There is increased interest in intraprepreneurship due to social, cultural, and business pressures for flexibility and growth within organizations. Establishing an intrapreneurial culture and climate within a company involves securing management commitment, identifying supported ideas, using technology, training employees, rewarding performance, and evaluating units.
THE NATURE AND IMPORTANCE OF ENTREPRENEURSFallahchay Ali
This is first chapter of Entrepreneurship and Business Planning.
After the lesson, reader must be able to:
1. Describe Nature, Development and History of Entrepreneurship
2. Identify The Entrepreneurial Decision Process
3.Describe different types of Start-ups
4. Recognize Role of Entrepreneurship in Economic Development
5. Identify Entrepreneurial Careers and Education
6. Identify Different types of Skills Required for Entrepreneurship
7. Describe Ethics and Social Responsibility of Entrepreneurs
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
How Does CRISIL Evaluate Lenders in India for Credit RatingsShaheen Kumar
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2. Law of Diminishing Marginal Utility
• Utility is the satisfaction one gets from
consuming a good or service
•Not the same as usefulness
•Subjective
•Difficult to quantify
LO1
3. Law of Diminishing Marginal Utility
• Util is one unit of satisfaction or
pleasure
• Total utility is the total amount of
satisfaction
• Marginal utility is the extra satisfaction
from an additional unit of the good
MU = ΔTU/ΔQ
LO1
4. Law of Diminishing Marginal Utility
• As consumption of a good or service
increases, the marginal utility
obtained from each additional unit of
the good or service decreases
• Explains downward sloping demand
LO1
6. Theory of Consumer Behavior
• Rational behavior
• Preferences
• Budget constraint
• Prices
LO2
7. Utility Maximizing Rule
• Consumer allocates his or her income
so that the last dollar spent on each
product yields the same amount of
extra (marginal) utility
• Algebraically
MU of product A MU of product B
Price of A Price of B
LO2
=
8. Numerical Example
LO2
The Utility Maximizing Combination of Apples and Oranges Obtainable with an
Income of $10
(2)
Apple (Product A):
Price = $1
(3)
Oranges (Product B):
Price = $2
(1)
Unit of
Product
(a)
Marginal
Utility,
Utils
(b)
Marginal
Utility per
dollar
(MU/Price)
(a)
Marginal
Utility,
Utils
(b)
Marginal
Utility per
dollar
(MU/Price)
First 10 10 24 12
Second 8 8 20 10
Third 7 7 18 9
Fourth 6 6 16 8
Fifth 5 5 12 6
Sixth 4 4 6 3
Seventh 3 3 4 2
9. Decision-Making Process
LO2
Sequence of Purchases to Achieve Consumer Equilibrium, Given the data in
Table 6.1
Choice
Number Potential Choices
Marginal
Utility
per Dollar Purchase Decision
Income
Remaining
1 First Apple
First Orange
10
12
First orange for $2 $8 = $10 - $2
2 First Apple
Second Orange
10
10
First apple for $1
and Second orange for $2
$5 = $8 -$3
3 Second Apple
Third Orange
8
9
Third orange for $2 $3 = $5 - $2
4 Second Apple
Fourth Orange
8
8
Second apple for $1
and Fourth orange for $2
$0 = $3 - $3
10. Deriving the Demand Curve
LO3
PriceofOrange
0
$1
$2
4 6
Quantity Demanded of Oranges
$2
1
4
6
Quantity
Demanded
Price Per
Orange
DO
11. Income and Substitution Effects
• Income effect
•The impact that a price change has
on a consumer’s real income
• Substitution effect
•The impact that a change in a
product’s price has on it’s relative
expensiveness
LO4
12. Applications and Extensions
• New products
•iPod
• Diamond-water paradox
• Opportunity cost and time
• Medical care purchases
• Cash and noncash gifts
LO5
13. Prospect Theory
• How people actually deal with life’s up
and downs
• People judge things relative to the
status quo
• People experience:
• Diminishing marginal utility for gains
• Diminishing marginal disutility for losses
• People are loss adverse
LO5
14. Losses and Shrinking Packages
• Consumers see any price increase as
a loss relative to the status quo
• Producers are reducing package size
instead of raising prices
LO5
15. Framing Effects and Advertising
• Consumers evaluate events in a
particular mental frame
• New information alters the frame in
which the consumer defines whether
situations are gains or losses
LO5
16. Anchoring and Credit Card Bills
• Estimates of value are influenced by
recent information no matter how
irrelevant
• Can lead to people altering valuations
unconsciously
LO5
17. Mental Accounting and Warranties
• Separate purchases into “mental
accounts” rather than looking at the
big picture
• Mental accounting exaggerates any
potential loss
LO5
18. The Endowment Effect
• Market transactions may be affected
by the endowment effect because:
•The seller has a tendency to
demand a higher price
•The buyer has a tendency to offer a
lower price
LO5
19. Nudging People
• Using behavioral economics to
change people’s behavior
• Subtle manipulations are used to
generate socially better outcomes
• Unaware of being manipulated
LO5
Editor's Notes
In this chapter, the law of diminishing marginal utility is developed, which leads into a detailed discussion of the theory of consumer choice. The numerical illustrations of the utility maximizing rule should be viewed as a pedagogical technique, rather than an attempt to portray the actual choice making process of consumers. When this illustration is explained by “order of purchase,” the brief algebraic summary of consumer equilibrium should pose no great difficulties for most students. The discussion of the diamond-water paradox helps students look beyond what may be their first conclusions about the importance and value of products.
Utility is a subjective notion in economics, referring to the amount of satisfaction a person gets from consumption of a certain item. Utility and usefulness are not the same thing. Items that are essentially useless can provide a lot of utility.
Utility is measured in utils. Total utility is the total amount of satisfaction one gets from the consumption of a single product or a combination of products. Total utility can be derived by adding up the utils of successive units consumed. Marginal utility refers to the extra utility a consumer gets from one additional unit of a specific product. In a short period of time, the marginal utility derived from successive units of a given product will decline. This is known as diminishing marginal utility.
Although consumers’ wants, in general, are insatiable, wants for specific commodities can be fulfilled. The more of a specific product that consumers obtain, the less they will desire more units of that product. Theory of consumer behavior uses the law of diminishing marginal utility to explain how consumers allocate their income.
Curves TU and MU are graphed from the data in the table. As more of a product is consumed, total utility increases at a diminishing rate, reaches a maximum, and then declines. Marginal utility, by definition, reflects the changes in total utility. Thus, marginal utility diminishes with increased consumption, becomes zero when total utility is at a maximum, and is negative when total utility declines. As shown by the shaded rectangles, marginal utility is the change in total utility associated with each additional taco. Or, alternatively, each new level of total utility is found by adding marginal utility to the preceding level of total utility.
Rational behavior – The consumer tries to use his or her money income to derive the greatest satisfaction from it.
Preferences – Each consumer has clear cut preferences for certain goods and services available in the market.
Budget constraint – At any point in time the consumer has a limited, fixed amount of money to spend.
Prices – Every good has a price and prices are unaffected by amounts purchased by the consumer. Goods and services have prices and are scarce relative to the demand for them.
A consumer is in equilibrium when utility is “balanced (per dollar) at the margin.” When this is true, there is no incentive to alter the expenditure pattern unless tastes, income, or prices change. When using the utility maximizing rule, it is important to express the marginal utility of the good as marginal utility per dollar spent since the two goods probably have different prices. Therefore, we can’t just compare utilities because it’s like comparing apples to oranges. So, we have to find the marginal utility per dollar by dividing the marginal utility of the good by the price.
It is assumed in this table that the amount of marginal utility received from additional units of each of the two products is independent of the quantity of the other product. For example, the marginal utility schedule for apples is independent of the number of oranges obtained by the consumer. When determining whether to buy the apples or oranges, we will compare the marginal utility per dollar.
This illustration shows how consumers must choose among alternative goods with their limited money incomes. As long as one good provides more utility per dollar than another, the consumer will buy more of the first good; as more of the first product is bought, its marginal utility diminishes until the amount of marginal utility per dollar just equals that of the other product. This table summarizes the step-by-step decision making process the rational consumer will pursue to reach the utility maximizing combination. The algebraic statement of this utility-maximizing state is that the consumer will allocate income in such a way that: MU of apples/price of apples = MU of oranges/price oranges
At a price of $2 the consumer represented by the data in the table maximizes utility by purchasing 4 oranges. The decline in the price of oranges to $1 disrupts the consumer’s initial utility-maximizing equilibrium. The consumer restores equilibrium by purchasing 6 rather than 4 oranges. Thus, a simple price-quantity schedule emerges, which creates two points on a downsloping demand curve.
The substitution effect and income effect work simultaneously. Income effect is the impact that a price change has on a consumer’s real income and, consequently, on the quantity demanded of the good. If the price of a good falls, income is freed up and can be used to buy more of both, or either, good under consideration. The income effect is shown by the fact that a decline in price expands the consumer’s real income and the consumer can purchase more of this and other products until equilibrium is once again attained for the new level of real income.
Substitution effect is the impact that a change in a product’s price has on its relative expensiveness and on the quantity demanded. If the price of a product falls, this decreases its relative expensiveness and thus the consumer will now substitute more of this good for the other. When the price of an item declines, the consumer will no longer be in equilibrium until more of the item is purchased and the marginal utility of the item declines to match the decline in price. More of this item is purchased rather than another relatively more expensive substitute.
iPods were a new product perceived by consumers as having a greater marginal utility to price ratio than the older portable CD players and other similar products, and thus resulted in a major shift in demand for the new product as consumers attempted to restore their consumer equilibrium.
Why do some goods that are essential to life have low prices and goods that are not essential to life have high prices? The marginal utility of the last unit of water consumed is small because we consume a lot of water. The marginal utility of the last diamond is large because we consume few diamonds.
Time also has a value, so this must be considered in decision making and utility maximization. When time is considered, consumer behavior appears to be much more rational. Highly skilled people, like doctors, earn high wages and therefore incur a higher opportunity cost whenever they use their time in some other way. They are more likely to buy goods over the internet and pay higher prices for things that will save them time. Unskilled workers or retirees have low opportunity costs for their time and therefore will use time to search out ways to save money. They are more likely to search for bargains and take longer trips if it saves them money. Foreigners observe that Americans waste material goods but conserve time. This could be because American’s high productivity makes their time more valuable than many of the goods they waste.
With medical care purchases Americans with health insurance pay an upfront fixed charge each month and this charge is not affected by the amount we consume. The additional marginal benefit is higher than the marginal cost of additional use. This explains why Americans use so much more than if they had to pay full price.
Noncash gifts result in a loss of utility and we then take action to maximize our utility, such as taking it back and exchanging it, etc. Noncash gifts may yield less utility to the receiver than a cash gift of equal monetary value because the noncash gift may not match the receiver’s preferences. Individuals know their own preferences better than the gift giver.
Daniel Kahnemman was awarded the Nobel Prize in economics for this work. People judge good things and bad things relative to the status quo or the situations they are used to.
People are loss adverse meaning we feel losses of some amount much more acutely than gains of the same amount.
Producers have to be careful about increasing prices because consumers are aware of the price changes and view higher prices as a loss. When producers faced sharply higher input costs a few years ago, instead of increasing prices, they responded by decreasing the package size. Some industries who have varied the size of their packages are cereal, soap, candy, and paper towels.
An example of framing would be labeling, such as “20% fat,” or “80% lean” meat, which are actually describing the same thing. However, one describes a loss (20% fat) and the other description is a gain (80% lean). If a new frame is introduced it can alter the consumer’s valuation of marginal utility and it will affect the consumption decision.
An example of anchoring is when credit card companies print out small minimum due payments. The small minimum payments serve as an anchor. This results in people making smaller payments over a longer period of time than they would otherwise.
Mental accounting explains the suboptimal tendency of people to view consumption purchases in isolation rather than all of their consumption options simultaneously. When making a TV purchase, the price of the new television is in the purchaser’s mind rather than their future income streams and their ability to pay in the case of the low probability of a television breaking down. People then buy an overpriced warranty on the TV (or some other electronics) even though new TVs (electronics) rarely break down past the expiration of the regular warranty.
People have a tendency to put a higher economic value on things that they currently possess rather than identical items that they might purchase. The loss adverse effect on the seller will be stronger than the gain effect on the buyer. Sellers put higher valuations on things they own and buyers put lower valuations on things they do not own.
Examples: By changing the default option on retirement plans to automatically enroll instead of not enroll, the number of people enrolled rose dramatically. An electric company used smiley faces on bills with below average usage and frowney faces on bills with above average usage to encourage people to conserve more energy.