AP_Krugman_Textbook

How do we measure utility? For the sake of simplicity, it is useful to suppose that we

can measure utility in hypothetical units called—what else?—utils.Autility function

shows the relationship between a consumer’s utility and the combination of goods and

services—the consumption bundle—he or she consumes.

Figure 51.1 illustrates a utility function. It shows the total utility that Cassie, who

likes fried clams, gets from an all-you-can-eat clam dinner. We suppose that her con-

sumption bundle consists of a side of coleslaw, which comes with the meal, plus a

number of clams to be determined. The table that accompanies the figure shows how

Cassie’s total utility depends on the number of clams; the curve in panel (a) of the fig-

ure shows that same information graphically.

Cassie’s utility function slopes upward over most of the range shown, but it gets flatter

as the number of clams consumed increases. And in this example it eventually turns down-

ward. According to the information in the table in Figure 51.1, nine clams is a clam too far.

Adding that additional clam actually makes Cassie worse off: it would lower her total util-

ity. If she’s rational, of course, Cassie will realize that and not consume the ninth clam.

512 section 9 Behind the Demand Curve: Consumer Choice

15

13

11

9

7

5

3

1

–1

0

15

28

39

48

55

60

63

64

63

Total

utility

(utils)

Marginal

utility per clam

(utils)

0 1 2 3 4 5 6 7 8 9

Quantity

of clams

Utility

function

Marginal

utility

curve

6543210 798

70

60

50

40

30

20

10

Total

utility

(utils)

Quantity of clams

654321 798

16

14

12

10

8

6

4

2

0

–2

Marginal

utility per

clam (utils)

Quantity of clams

(a) Cassie’s Utility Function

(b) Cassie’s Marginal Utility Curve

figure 51.1 Cassie’s Total Utility and Marginal Utility

Panel (a) shows how Cassie’s total utility

depends on her consumption of fried clams.

It increases until it reaches its maximum

utility level of 64 utils at 8 clams consumed

and decreases after that. Marginal utility is

calculated in the table. Panel (b) shows the

marginal utility curve, which slopes down-

ward due to diminishing marginal utility.

That is, each additional clam gives Cassie

less utility than the previous clam.

Autilis a unit of utility.