In This Chapter
Seeing what people choose when unconstrained
Understanding the concept of marginal utility
Sometimes you just can’t seem to choose what you want — limits are everywhere: speed limits, calorie limits, age limits, height limits on rollercoasters that drive the child who’s just an inch short of the restriction wild with frustration. Well, no limits in this chapter. Here we look at unconstrained consumer choice. This situation may not be very realistic, but it allows economists to examine consumer behavior with no nasty intrusions to get in the way of what people want, such as lack of time or money (don’t worry, Chapter 5 covers constraints).
Chapter 2 looks at the consumer choice model that economists use to investigate people’s preferences and introduces some of the key tools of analysis — for example, indifference curves and the concept of utility (the value a representative consumer gets from consuming something). This chapter looks at utility in a more mathematical way, in particular in terms of something called the utility function. This tool occurs frequently in economics and is helpful for understanding what lies behind demand and supply in a given market, and so it’s a tool with much utility (groan).
We build up a mathematical ...