The utility function

1. UTILITY
- IS AN IMPORTANT CONCEPT IN
ECONOMICS, BECAUSE IT
REPRESENTS SATISFACTION
EXPERIENCED BY THE CONSUMER OF
A GOOD.

2. TOTAL UTILITY
(TU)
MARGINAL UTILITY
MU

5. Law of Diminishing Marginal
Utility In Calvin’s mind

6. CONSUMPTION

7. THE INDIFFERENCE CURVE
 Useful tool for analyzing consumption
behavior on the utility theory
MARGINAL RATE OF SUBSTITUTION
(MRS)
MRS= ∆ Food consumption
∆ clothing consumption

8. Food Consumption Clothing Consumption Marginal Rate of
Substitution
56 1 -
46 2 (10)
37 3 (9)
29 4 (8)
22 5 (7)
16 6 (6)
11 7 (5)
8 8 (4)
5 9 (3)
3 10 (2)
2 11 (10

9. THE LAW OF DIMINISHING
MARGINAL UTILITY AND THE
SHAPE OF THE CURVE