Budget line & utility

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Intros
Lessons
  1. Budget Line & Utility Overview:
  2. Consumption Choices
    • Consumption Possibilities Curve
    • Budget Line
    • Consumer Preferences
    • Utility & Marginal Utility
  3. Consumption Possibilities Curve (Budget Line)
    • Curve shows all possible consumption of the consumer
    • Limited by prices and income
    • Below/On the line is what consumer can afford
    • Above of the line is what consumers cannot afford
  4. Consumer Preferences (Utility)
    • The likes and dislikes of consumers
    • Total Utility & Marginal Utility
    • Diminishing Marginal Utility
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Examples
Lessons
  1. Understanding Price Elasticity of Demand
    You are given that the price of fruits is $3, and the price of juice boxes are $6. If you have an income of $30, list all possible choices that you can make when buying the goods, and graph them on the budget line.
    1. You are given that the price of cups is $2, and the price of bowls are $8. If you have an income of $32, list all possible choices that you can make when buying the goods, and graph them on the budget line.
      1. Finding the Total Utility and Marginal Utility
        Kevin likes to play soccer and basketball. For every hour of playing soccer or basketball, he gains utility. The following table shows how much utility is gained:

        # of hours

        Soccer Utility (per hour)

        Basketball utility (per hour)

        0

        0

        0

        1

        50

        30

        2

        80

        55

        3

        90

        75

        4

        95

        90

        5

        99

        100

        1. Find the Marginal utility curve for both soccer and basketball
        2. Does the principle of diminishing marginal utility apply here?
      2. Olivia likes to spend free time or go shopping. For every hour free time, or going shopping, she gains utility. The following table shows how much utility is gained:

        # of hours

        Free time Utility (per hour)

        Shopping utility (per hour)

        0

        0

        0

        1

        50

        30

        2

        80

        55

        3

        90

        75

        4

        95

        90

        5

        99

        100

        1. Find the Marginal utility curve for both soccer and basketball
        2. Does the principle of diminishing marginal utility apply here?