8,728
edits
Changes
Jump to navigation
Jump to search
Line 68:
Line 68: − +
→Utility
The rational consumer maximizes utility by spending each dollar in a way to maximize marginal utility for that dollar. For such a consumer, the marginal utility of every good divided by that good’s price must be equal. MUx/Px = MUy/Py=MUz/Pz, where MUx is the marginal utility of good “x” and Px is the price of good “x”. This is known as the Law of equiproportion marginal benefit.
The rational consumer maximizes utility by spending each dollar in a way to maximize marginal utility for that dollar. For such a consumer, the marginal utility of every good divided by that good’s price must be equal. MUx/Px = MUy/Py=MUz/Pz, where MUx is the marginal utility of good “x” and Px is the price of good “x”. This is known as the Law of equiproportion marginal benefit.
It is impossible for anyone else to measure your utility, or for you to try to compare your total utility to that of other consumers. What you can do is decide for yourself which goods and prices give you the greatest utility, and then buy accordingly. That may include political and religious views in addition to pure dollars and cents. For example, some conservatives boycott companies that fund abortion, regardless of how inexpensively those companies sell their goods. Such a boycott maximizes the participants’ utility, but not their savings. Many other boycotts have occurred in American history based on principles rather than price (“principle, not principal!”).
It is impossible for anyone else to measure your utility, or for you to try to compare your total utility to that of other consumers. What you can do is decide for yourself which goods and prices give you the greatest utility, and then buy accordingly. That may include political and religious views in addition to pure dollars and cents. For example, some conservatives boycott companies that fund [[abortion]], regardless of how inexpensively those companies sell their goods. Such a boycott maximizes the participants’ utility, but not their savings. Many other boycotts have occurred in American history based on principles rather than price (“principle, not principal!”).
==Indifference Curve==
==Indifference Curve==