Overview
Utility maximization is a fundamental concept in economics that explains how consumers make choices to achieve the highest level of satisfaction from their purchases. It involves understanding the relationship between consumer preferences, budget constraints, and the prices of goods. When prices cha...
Key Terms
Example: Eating a delicious meal provides high utility.
Example: If you have $20 and apples cost $2, you can buy 10 apples.
Example: An indifference curve might show combinations of apples and oranges that yield equal satisfaction.
Example: The first slice of pizza gives more satisfaction than the fifth.
Example: Market equilibrium occurs when the quantity of goods supplied equals the quantity demanded.
Example: If the price of a product increases and demand decreases significantly, it is considered elastic.