Chapter Outline

6.1 Marginal Utility and Consumer Choice

6.2 Income and Substitution Effects of Price Changes

6.3 Consumer Surplus

AFTER STUDYING THIS CHAPTER YOU WILL BE ABLE TO

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 Learning Objectives (LO)

1. distinguish between marginal and total utility.

2. explain how utility-maximizing consumers adjust their

expenditure until the marginal utility per dollar spent is equalized

across products.

3. explain how the income and substitution effects of a price change

determine the slope of a demand curve.

4. see that consumer surplus is the “bargain” the consumer gets by

paying less for the product than the maximum price he or she is

willing to pay.

5. explain the “paradox of value.”