1. Utility: Getting Satisfaction Movies Other Total Concerts (6 @ $40) $240 (20 @ $8) 160 1,600 $2,000 A limited income. The mix of food, entertainment, etc. that provides the greatest benefit. 10 The Rational Consumer

2. 20212223 1300 1350 1400 1450 1500 1550 No. of movies Utility 20212223 56 57 58 59 60 61 No. of movies Marginal Utility Utility and Marginal Utility: Movies 20 21 22 191,330 1,390 1,449 1,507 UtilityMU

3. 678 2500 2600 2700 2800 2900 3000 No. of concerts Utility 678 100 150 200 250 300 350 No. of concerts Marginal Utility Utility and Marginal Utility: Concerts 6 7 8 52,250 2,550 2,800 3,000 UtilityMU

4. 2 3 4 5 6 ConcertsMovies 7 8 Budgets and Optimal Consumption Total Entertainment Budget = $400 Concerts = $40 Movies = $8

5. 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

6. 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

7. Not enough moviesNot enough concerts 5 6 7 4 8 400 u 350 u 300 u 250 u 200 u Marginal utility 10 8.75 7.5 6.25 5 MU $ 15 20 25 10 30 70 u 65 u 60 u 55 u 50 u Marginal utility 8.75 8.13 7.5 6.88 6.25 MU $ Concerts ($40)Movies ($8) Just about right Marginal Utility per Dollar

8. Law of Demand Mov Other Total Conc (6@$40) 240 (20@$8) 160 1,600 $2,000 (5@$50) 250 (23@$8) 184 1,566 $2,000 (4@$60) 240 (27@$8) 216 1,544 $2,000 Less demand as price increases Utility and the Demand Curve Optimal combos for different concert prices:

9. The Income Effect Mov Other Total Conc (6@$40) 240 (20@$8) 160 1,600 $2,000 (5@$50) 250 (23@$8) 184 1,566 $2,000 (4@$60) 240 (27@$8) 216 1,544 $2,000 A less enjoyable bundle of entertainment And less other stuff. Substitution Effect More movies Optimal combos for different concert prices: