Tiêu đề 1. A2 Economics - Notes.pdf ✅

A2 – ECONOMICS (9708) MICRO CHAPTER 1 Utility and Consumer Choice Topics | Total Lectures = 5 Topic 1: Marginal Utility Topic 2: Budget Line and Indifference Curve
A2 / MICRO — [NOTES] — CHAPTER 1 AATIK TASNEEM | O/A-LEVEL | BUSINESS & ECONOMICS | 0304 1122845 1 TOPIC 1: UTILITY AND MAGRINAL UTILITY Lecture 1 Definition | Utility: It is the satisfaction gained from the consumption of a good or service. It helps to satisfy a human need. Definition | Total Utility: It is the total satisfaction gained from the consumption of given amount of goods and services. Definition | Marginal Utility: It is the extra utility gained from consumption of one more unit of good or service. In other words it is the change in the total utility. Marginal Utility = Δ TU Δ Q Conditions of Diminishing Marginal Utility In order for the law to hold the following conditions should be met: Condition Description 1. Quality The quality of the goods should remain constant otherwise if the quality improves people might consume more of it or if the quality drops they might discontinue the product. 2. Quantity A reasonable quantity must be decided for the product. Example: If utility of chocolate is being measured then a bar should be considered than a small piece. 3. Ceteris Paribus This law only holds while assuming everything else like taste, fashion weather etc. are held constant. 4. Continuous use There should be a continuous use of the good which a consumer is consuming. 1. LAW OF DIMINISHING MARGINAL UTILITY (CARDINAL APPROACH) Definition: This states that the more units of a good are consumed, the lower the utility from consuming those additional units. Example: If a person consumes ice cream bars the first bar will give him more utility and as the consumption goes on the second would give lesser satisfaction. In order to understand the concept let’s look at an example: No. of Ice Cream Bars Total Utility Marginal Utility 1 20 20 2 35 15 3 45 10 4 50 5 5 50 0 6 45 -5
A2 / MICRO — [NOTES] — CHAPTER 1 AATIK TASNEEM | O/A-LEVEL | BUSINESS & ECONOMICS | 0304 1122845 2 Lecture 2 1. Marginal utility and derivation of an individual demand schedule If marginal utility were measured in terms of money then the MU curve would be the persons demand curve. A rational consumer will tend to maximize their utility from consumption and in order to do so will try to consume at a point where marginal utility equals price. As long this is maintained the individual demand curve would be the same as the marginal utility curve. MU = P In order to understand this let’s look at the diagram below: - MU > P: If the marginal utility is greater than the price of the product the consumer would tend to increase the consumption of the product because the benefit or marginal utility is higher than the asking price. - MU < P: If marginal utility is less than the price of the product the consumer would tend to decrease consumption of the product because the benefit or marginal utility of the product is lower than the asking price.