Consumer Choice Theory and Marginal Analyst
In order to understand consumer choice theory and marginal analyst there are a few definitions to define and quantify.
Util = a hypothetical unit used to measure how much utility a person obtains from consuming a good.
Utility=a satisfaction or please a person obtains from consuming a good or service
Total utility=the amount of satisfaction received from all the units of a good or service consumed
Marginal utility is the change in total utility from one additional unit of good or service
The Law of Diminishing marginal utility is marginal utility of a good or service eventually declines as consumption increases.
Consumer Choice Theory, Utility is the power of satisfaction or pleasure derived …show more content…
The price of the tickets were $550 each. This effect would not be considered a normal monthly purchase, this was considered an annual budget of a vacation we might consider. We also tried to bucket the event as a splurge, a once in a lifetime event. So taking it out of a budget and recognized we would be dipping into savings to pay for. Based on our desire it was seriously considered until we understood the cost beyond just the football tickets. If the tickets were the only costs, we might have consider going to the game, even though there was a huge desire, when you factored in the overall costs of everything on top of the sporting tickets, the realization of the total cost to attend the event for about 24 hours, was more expensive and less desirable than going on a vacation in the Mexican Riviera for 5 …show more content…
(Yes fair weather fans. )
Now if the football tickets had been cut in half, although lower in cost, it still did not lower the overall cost of the total event, therefore we still would not have gone. In this case an indifference curve was created. In theory consumer optimal choice is represented as the differential curve and the budget constraint points to the choice
IF our income had increased by 100%+, we would have gone to the Superbowl and we would have gone on the trip to Mexico! In this case the Utility-Maximizing Solution comes into play. It assumes that each consumer seeks the highest indifference curve possible. “The budget line gives the combinations of two goods that the consumer can purchase with a given budget. Utility maximization is therefore a matter of selecting a combination of two goods that satisfies two conditions.”
Table salts is a staple in our house. It’s not a budgeted item, as it’s cost is inexpensive. We buy salt when we need it or run out. We buy it today and would still buy it if it was half price and would buy if we made 100%
In order to understand consumer choice theory and marginal analyst there are a few definitions to define and quantify.
Util = a hypothetical unit used to measure how much utility a person obtains from consuming a good.
Utility=a satisfaction or please a person obtains from consuming a good or service
Total utility=the amount of satisfaction received from all the units of a good or service consumed
Marginal utility is the change in total utility from one additional unit of good or service
The Law of Diminishing marginal utility is marginal utility of a good or service eventually declines as consumption increases.
Consumer Choice Theory, Utility is the power of satisfaction or pleasure derived …show more content…
The price of the tickets were $550 each. This effect would not be considered a normal monthly purchase, this was considered an annual budget of a vacation we might consider. We also tried to bucket the event as a splurge, a once in a lifetime event. So taking it out of a budget and recognized we would be dipping into savings to pay for. Based on our desire it was seriously considered until we understood the cost beyond just the football tickets. If the tickets were the only costs, we might have consider going to the game, even though there was a huge desire, when you factored in the overall costs of everything on top of the sporting tickets, the realization of the total cost to attend the event for about 24 hours, was more expensive and less desirable than going on a vacation in the Mexican Riviera for 5 …show more content…
(Yes fair weather fans. )
Now if the football tickets had been cut in half, although lower in cost, it still did not lower the overall cost of the total event, therefore we still would not have gone. In this case an indifference curve was created. In theory consumer optimal choice is represented as the differential curve and the budget constraint points to the choice
IF our income had increased by 100%+, we would have gone to the Superbowl and we would have gone on the trip to Mexico! In this case the Utility-Maximizing Solution comes into play. It assumes that each consumer seeks the highest indifference curve possible. “The budget line gives the combinations of two goods that the consumer can purchase with a given budget. Utility maximization is therefore a matter of selecting a combination of two goods that satisfies two conditions.”
Table salts is a staple in our house. It’s not a budgeted item, as it’s cost is inexpensive. We buy salt when we need it or run out. We buy it today and would still buy it if it was half price and would buy if we made 100%