Unit 2 Reflection 1.Does your grade reflect your learning? Why or why not? 2.What is working? What can Mr. Simpson do to help? 3.What is not working? What.

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Presentation transcript:

Unit 2 Reflection 1.Does your grade reflect your learning? Why or why not? 2.What is working? What can Mr. Simpson do to help? 3.What is not working? What do we need to change? 4.Identify three goals for the next unit 1

Consumer Choice and Utility Maximization 2

The Law of Diminishing “ADDITIONAL” “SATISFACTION” 3

Would you see the movie three times? Notice that the total benefit is more than the total cost but you would NOT watch the movie the 3 rd time. Thinking at the Margin # Times Watching Movie Marginal Utility Price 1st$30$10 2nd$15$10 3rd$5$10 Total$50$30

Calculate Marginal Utility # of Slices of Pizza Total Utility (in utils) Marginal Utility/Benefit How many slices of pizza would you buy if the price per slice was $2? 5

Calculate Marginal Utility # of Slices of Pizza Total Utility (in dollars) Marginal Utility/Benefit How many pizzas would you buy if the price per slice was $2? Marginal Cost $2 6

Calculate Marginal Utility # of Slices of Pizza Total Utility (in dollars) Marginal Utility/Benefit How many pizzas would you buy if the price per slice was $2? Marginal Cost You will continue to consume until Marginal Benefit = Marginal Cost 7

CONSUMER BEHAVIOR You plan to take a vacation and want to maximize your utility. Based on the info below, which should you choose? Destination Marginal Utility (In Utils) Price Tahiti3000$3,000 Chicago1000$500 Marginal Utility Per Dollar 1 Util 2 Utils 8

CONSUMER BEHAVIOR You plan to take a vacation and want to maximize your utility. Based on the info below, which should you choose? Destination Marginal Utility (In Utils) Price Tahiti3000$3,000 Chicago1000$500 Marginal Utility Per Dollar 1 Util 2 Utils Calculating Marginal Utility Per Dollar allows you to compare products with different prices. 9

If you only have $25, what combination of movies and go carts maximizes your utility? Utility Maximization # Times Going Marginal Utility (Movies) MU/P (Price =$10) Marginal Utility (Go Carts) MU/P (Price =$5) 1st3010 2nd205 3rd102 4th51 $10$5

If you only have $25, what combination of movies and go carts maximizes your utility? Utility Maximization # Times Going Marginal Utility (Movies) MU/P (Price =$10) Marginal Utility (Go Carts) MU/P (Price =$5) 1st30310$2 2nd20$25$1 3rd10$12$.40 4th5$.501$.20 $10$5

If you only have $25, what combination of movies and go carts maximizes your utility? Utility Maximization # Times Going Marginal Utility (Movies) MU/P (Price =$10) Marginal Utility (Go Carts) MU/P (Price =$5) 1st nd20$25$1 3rd10$12$.40 4th5$.501$.20 $10$5

If you only have $25, what combination of movies and go carts maximizes your utility? Utility Maximization # Times Going Marginal Utility (Movies) MU/P (Price =$10) Marginal Utility (Go Carts) MU/P (Price =$5) 1st nd rd th $10$5

Utility Maximizing Rule The consumer’s money should be spent so that the marginal utility per dollar of each good equal each other. MUx = MUy 14 P x P y Assume apples cost $1 each and oranges cost $2 each. If the consumer has $7, identify the combination that maximizes utility.

Utility Maximizing Rule The utility maximizing rule assumes that you always consume where MU/P for each product is equal 15 One point is earned for calculating the price of a unit of bananas, 4 utils/x = 8, x = $.50 One point is earned for stating that Sasha will purchase fewer peanuts.