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THE THEORY OF CONSUMER DEMAND & UTILITY Chapter Summary 1. The crave curve is downward-sloping beca example of the replenishment & income effects. These effects refer to thefact that when the price of a trade good falls, consumers use this commodity to replace similar commodities in consumption & house purchase more of this commodity & other commodities. 2. A commodity is demanded because of the usefulness derivered from its consumption. The law of dim inishing borderline utility states that although get utility make ups as more of the commodity is consurned, the borderline utility derived from separately additional unit decreases. 3. A consumer maximizes utility when the marginal utility of the last dollar spent on each commodity is the same. 4. To derive an individual demand curve, we start at a forefront where the consumer is in equilibrium. At a glower price, the consumer must purchase more of the commodity to remain in equilibrium. These & other points similarly obtained deline an individual downsloping demand curve. 5. Consumers redundant refers to the difference between what the consumer is willing to pay to purchase a addicted number of units of a commodity & what he or she actually pays for them. It is measured by the area under the demand curve & above the commodity price.

Important Terms Consumers equilibrium. The point at which the consumer maximize the total utility or rapture from spending his or her income. Consumers surplus. The difference between what the consumer would be willing to pay for a given amount of a commodity & what he or she actually pays. Diminishing marginal utility. A concept stating that as an individual consumers more units of a commodity per unit of time, the total utility he or she receives increases, but the extra or marginal utility decreases. Income effect. The increase in the quantity purchased of a commodity with a given money income when the commodity price falls. Paradox of value. The question of why... If you pauperism to get a full essay, order it on our website: Orderessay

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