Consumer Behaviour and Marginal Utility

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Micro-Economics
Report of Microeconomics

Submitted by:
Sultan Lashari
10 2629
Submitted To:
SIR MICHAEL SIMON

Program:
BACHELORS OF BUSINESS ADMINISTRATION
FALL 2010 -------------------------------------------------

National University of Computer & Emerging Science
Management Science Department,
Karachi, Campus

ACKNOWLEDGEMENT

I would like to thank Allah Almighty for giving me the strength that made it possible for me to make this report. I am also truly indebted to our course instructor Sir Michael Simon whose tremendous guidance and knowledge played a key role in the making and completion of this report.

I am also grateful to my parents for their moral support and valuable prayers. Thank you for the ones who supported me. I wouldn’t have been standing here without you all, feeling proud on accomplishing the task that was assigned to me.

Thanks
Sultan Lashari
10 2629

LETTER OF TRANSMITTAL
TO: Sir Michael Simon, Instructor micro economics
FROM: Sultan Lashari, 10K 2629
DATE: 29th/November/ 2010

SUBJECT: Consumer behavior and Marginal utility
We present our report on “CONSUMER BEHAVIOR AND MARGINAL UTILITY” that was assigned to us. This report provides information related to rational behavior of individual and utility of individual This report is divided into some parts, such as the INTRODUCTION. This part gives the overview. Second heading is CONSUMER BEHAVIOR. It consists of definition and we have also explained its ASSUMPTIONS in the third heading .The fourth part give the information about UTILITY. The fifth and sixth part explains the topic with the heading TOTAL UTILITY AND MARGINAL UTILITY respectively. After that in the seventh part we have discussed the LAW OF DIMINISHING MARGINAL UTILITY. We have also explained UTILITY MAXIMAIZATION RULE AND APPLICATION in the third last and second last part, and the last part focuses on the CONCLUSION.

Table of Contents
Executive summary …………………………………………………………………………………………………………………….5
1.Introduction6
2.Consumer behavior6
6. Utility ………………………………………………………………………………………………………………………………………...9 7. Total utility …………………………………………………………………………………………………………………………………9 8. Marginal utility ………………………………………………………………………………………………………………………..…9 9. Law of diminishing marginal utility …..………………………………………………………………………………………..9 10. Utility maximization rule ………………………………………………………………..………………………………………….9 11. Application ………………………………………………………………………………………………………………….…..…....10 12. Conclusion ...............................................................................................................................……11 13. Bibliography ……………………………………….………………………………..………………………………………………….12

Executive Summary

Consumers allocate their money income among many goods and services available for purchase. The consumer behavior has four dimensions; rational behavior, preferences, budget constraint and prices. Utility (total utility) can be defined as the (total) pleasure derived by doing some act. Marginal utility can be defined as extra satisfaction obtained by consuming additional units of a product. The law of diminishing marginal utility states that as the total utility increases the marginal utility decreases and as the marginal utility becomes negative the total utility decreases.

1. Introduction
This report includes the information related to the CONSUMER BEHAVIOR AND MARGINAL UTILITY. It also tells us about the ASSUMPTIONS OF CONSUMER BEHAVIOR, THE LAW OF DIMINISHING MARGINAL UTILITY AND UTILITY MAXIMAIZATION RULE. It also explains the APPLICATION AND CONCLUSION.

2. Consumer behavior
Consumer behavior means...
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