Preferences and Utility

Session Overview
Behind every supply and demand curve is an army of producers and consumers making their own decisions. For consumers, their decisions are driven, quite simply, by what they want! All consumers make decisions to maximize their utility. In this lecture, we will learn about utility, how to define it and how we represent it mathematically. How does each slice of pizza you consume impact your utility for the next? Image courtesy of William Jones on Flickr. Keywords: Consumer theory; preference assumptions; indifference curves; utility functions; marginal utility.

Session Activities
Readings Read the recitation notes, which cover new content that adds to and supplements the material covered in lecture.

Recitation: Calculating Elasticities (PDF)

Before watching the lecture video, read the course textbook for an introduction to the material covered in this session:

[R&T] Chapter 7, "The Analysis of Consumer Choice." Sections 7.1, 7.2.1-2, and 7.3.2. [Perloff] Chapter 4, "Consumer Choice." (optional)

Lecture Videos View Full Video

Lecture 4: Preferences and Utility (00:48:10) Transcript (PDF)

View by Chapter

Introduction to Consumer Theory (00:04:39) Consumer Preference Assumptions (00:04:52) Properties of Indifference Curves (00:10:26) Utility Functions (00:03:15) Marginal Utility (00:09:18) Marginal Rate of Substitution (00:15:34)

Resources

Graphs and Figures (PDF)

Further Study
These optional resources are provided for students that wish to explore this topic more fully. Textbook Study Materials See the [Perloff] companion website for an overview of the main topics covered in the chapter, as well as quizzes, applications, and other related resources.

Chapter 4