Chapter Overview
This chapter introduces the concepts of consumer equilibrium, utility, and the demand for goods. It explains how consumers allocate their income to different goods to maximize utility and how changes in price affect demand. The chapter also discusses the law of demand, movement along and shifts in the demand curve, and the price elasticity of demand.
Important Keywords
- Utility: The satisfaction or pleasure derived from consuming a good or service.
- Total Utility (TU): The total satisfaction received from consuming a certain quantity of goods.
- Marginal Utility (MU): The additional utility gained from consuming one more unit of a good.
- Consumer Equilibrium: The point at which a consumer gets the maximum satisfaction with limited income and prices of goods.
- Demand: The quantity of a good that a consumer is willing and able to purchase at a given price.
- Law of Demand: States that quantity demanded falls as price increases, and vice versa, other things being equal.
- Price Elasticity of Demand: Measures the responsiveness of quantity demanded to a change in price.
Detailed Notes
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