Microeconomics › Section F · Consumer choices › Topic F.1
Utility and consumption choices
Why does a shopper leave with these items and not those? Consumer theory models the answer as a hunt: with a fixed budget, buy the mix of goods that squeezes the most satisfaction out of every dollar. Two tools do the work - marginal utility, which fades, and a simple equalising rule.
In this topic
- Utility: satisfaction made precise
- Marginal utility, and why it fades
- The utility-maximising rule
- The decision process, step by step
- Worked example: rebalancing nachos and spring rolls
- Worked example: the diamond-water paradox, resolved
- From the rule to the demand curve
- Consumer surplus reread through utility
- Limits of the model
- Common mistakes to avoid
- Key takeaways
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