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Lecture Comments (19)

1 answer

Last reply by: Professor Jibin Park
Tue Feb 23, 2016 10:14 PM

Post by Nishita Karri on February 23 at 10:09:28 PM

The course does not move and it is getting stuck. Same thing is happening is happening in various devices. It starts with this topic and the same thing happens for supply demand chapter also

3 answers

Last reply by: Professor Jibin Park
Fri Feb 5, 2016 4:43 PM

Post by Luvivia Chang on February 4 at 09:20:00 PM

In the final example, why does the marginal utility per dollar of the last apple Jane bought have to equal that of the last peach she bought? I mean, between the last peach and the last apple, if the marginal utility per dollar of the two don't equal to each other, the one with lower MU/D just have to have higher value than the MU/D of buying another fruit of the other kind in order to maximize utility. Isn't that right?

2 answers

Last reply by: leeyanna gerbich
Sun Aug 9, 2015 12:03 PM

Post by leeyanna gerbich on August 8, 2015

Given this info: weekly budget of $800 what is the optimal consumption bundle of donuts and pizza ... donuts $4 a box and pizza $8 a box.  I thought it was 200/4= MU for donuts an 100/8= 12.5 for pizza but this is only the marginal, right? Seems I havnt been given enough info.

1 answer

Last reply by: Professor Jibin Park
Tue Dec 23, 2014 9:39 PM

Post by Shi Zhen Li on December 23, 2014

If we answer example #3 as 3 chickens and 1 steak, doesn't that mean that MUchicken/Pchicken won't equal to MUsteak/Psteak. Won't optimal consumption bundle be 2 chicken and 1 steak?

If we draw a linear graph won't there only be an intersection at 2 chicken and 1 steak since 10 = 10?

1 answer

Last reply by: Professor Jibin Park
Mon Oct 20, 2014 9:59 AM

Post by Rebecca Dai on October 19, 2014

At least how many points should we get out of 100 to get a 5? Thank you!

1 answer

Last reply by: Professor Jibin Park
Sun Sep 21, 2014 11:25 PM

Post by Zhengpei Luo on September 21, 2014

In example 6, should the last peach decrease jane's utility instead of increase because of the diminishing MU?
why would the utility increased?

1 answer

Last reply by: Professor Jibin Park
Sat May 31, 2014 1:20 PM

Post by Taylor Wright on May 31, 2014

In example V, is it not also asking if the amount consumed should change? Considering that one of the options is to purchase even more cookies and less brownies, and the other option is to maintain current consumption.  Wouldn't we need to have a table similar to example III?  Thanks!

1 answer

Last reply by: Professor Jibin Park
Sun Apr 20, 2014 7:45 PM

Post by Richard Wolf on April 20, 2014

In Example 3, after we had spent $20 on the two pieces of chicken and one steak, we chose to spend our last $5 on chicken for two reasons: (1) the MU per $ for chicken was greater than that for chicken and (2) we only had $5 left. I have three questions:

1) If the MU per $ after spending the first $20 was the same for both steak and chicken, would we still buy only the chicken because we only had $5 and the steak was $10?

2) If the MU per $ after spending the first $20 was the same for both steak and chicken and the steak and chicken were both only $5 (and we only have $5 left), how would we handle that situation?

3) If the MU per $ after spending the first $20 was was greater for steak than for chicken but we only had $5 left (the steak is now back to $10), how would we handle that situation?

Or are we simply not going to run into situations like the above? Thanks!

Utility Maximization

  • Utility deals with the total benefit an individual receives whereas marginal utility has to do with the benefit an additional item gives
  • Marginal utility per dollar is the marginal utility of a good divided by the price of the good (MUx/Px)
  • Most items face diminishing marginal utility – as you consume more and more items, the marginal utility decreases (or, the total utility increases and a decreasing rate)
  • In order to find the optimal consumption bundle, you set the marginal utility per dollar of two items equal to each other. (MUx/Px = MUy/Py).
  • Whatever item has a higher marginal utility per dollar is the item that a rational consumer will decide to consume
  • Ultimately, utility maximization is what people naturally do because everything is scarce and we must therefore make choices with limited resources (money, in this case).

Utility Maximization

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Lesson Overview 0:14
  • I. Basic Economic Concepts 0:47
  • Utility vs. Marginal Utility 2:18
    • Utility
    • Marginal Utility
    • Examples
  • Marginal Utility Per Dollar 4:07
    • Definition of Marginal Utility Per Dollar
    • Constrained by a Budget
    • Role of Scarcity
  • Diminishing Marginal Utility 7:20
    • Definition of Diminishing Marginal Utility
    • Krispy Kreme Experiment
  • Optimal Consumption Bundle 9:59
    • Optimal Consumption Bundle Rule
    • Select the Higher Marginal Utility Per Dollar
    • Value Begins to Fall
  • Example 1 11:04
  • Example 2 14:15
  • Example 3 18:16
  • Example 4 21:13
  • Example 5 24:09
  • Example 6 27:50