Utility: Getting Satisfaction Movies Other Total Concerts $40) $240 $8) 160 1,600 $2,000 A limited income. The mix of food, entertainment, etc. that provides the greatest benefit. 10 The Rational Consumer

No. of movies Utility No. of movies Marginal Utility Utility and Marginal Utility: Movies ,330 1,390 1,449 1,507 UtilityMU

No. of concerts Utility No. of concerts Marginal Utility Utility and Marginal Utility: Concerts ,250 2,550 2,800 3,000 UtilityMU

ConcertsMovies 7 8 Budgets and Optimal Consumption Total Entertainment Budget = $400 Concerts = $40 Movies = $8

Mov Other Total Conc1,050 u 2,380 u 10,000 u 13,430 u 2,550 u 1,390 u 10,000 u 13,940 u 3,250 u 0 u 10,000 u 13,250 u 2 concerts 40 movies 6 concerts 20 movies 10 concerts 0 movies Total Utility

Mov Other Total Conc2,250 u 1,675 u 10,000 u 13,925 u 2,550 u 1,390 u 10,000 u 13,940 u 2,800 u 1,080 u 10,000 u 13,880 u 5 concerts 25 movies 6 concerts 20 movies 7 concerts 15 movies Total Utility

Not enough moviesNot enough concerts u 350 u 300 u 250 u 200 u Marginal utility MU $ u 65 u 60 u 55 u 50 u Marginal utility MU $ Concerts ($40)Movies ($8) Just about right Marginal Utility per Dollar

Law of Demand Mov Other Total Conc ,600 $2, ,566 $2, ,544 $2,000 Less demand as price increases Utility and the Demand Curve Optimal combos for different concert prices:

The Income Effect Mov Other Total Conc ,600 $2, ,566 $2, ,544 $2,000 A less enjoyable bundle of entertainment And less other stuff. Substitution Effect More movies Optimal combos for different concert prices: