Utility

STUDENT'S VERSION

This lesson printed from:
http://www.econedlink.org/lessons/index.php?lid=865&type=student

INTRODUCTION

Jeremy Bentham once said, "Man seeks pleasure and avoids pain." Do you agree? Classical economists argue that all behavior results in utility. In this lesson, you will learn how to use the concept of utility to maximize your behavior. For example, after you learn the concept of marginal analysis, you willl be able to apply your knowledge to every day activities such as how long to study or workout. We will begin by looking at  howeconomists measure utility by observing you or a classmate eat marshmallows!

TASK

Today, you will watch a classmate reveal his or her utility for eating marshmallows. You will watch as a classmate, eats large marshmallows and explains how much satisfaction he or she receives from each additional marshmallow consumed. You will then apply your knowledge to a simple problem.  Specifically, you will graph a total utility and marginal utility curve.  From the marginal utility curve, you will observe diminishing marginal utility.

PROCESS

 

You or one of your classmates will be asked to be a lab rat in an economics experiment. If you like to eat marshmallows, consider volunteering!

In this experiment, you will eat marshmallows and record your satisfaction. From this you will graph and learn how to calculate total utility and marginal utility.

If you are not the volunteer selected, then rate your own satisfaction on a scale of 1 – 10 and graph your utility.

Your teacher will distribute a worksheet for you to complete.

CONCLUSION

How would the graph be changed if another student would have been chosen to eat the marshmallows? Do you use marginal thinking for all of your daily activities? For example, do you try to maximize the amount of sleep you get? Do you try to maximize the amount of time you spend on the computer every night? Economics predicts that you make these decisions by weighing the costs and benefits of your actions. If you are not convinced that you use marginal decision making daily, consider the following hypothetical situation. Suppose your mom told you that you were going to have to clean your room to the point where you could eat off the floor. Would it be worth it for you to clean your room in terms of what you would give up in study time, extra-curricular activities, and family time? Economics predicts that you would only clean your room to the point where costs and benefits are equal.

ASSESSMENT ACTIVITY

Use the following information to graph the total utility and marginal utility for Juan's consumption of chocolate covered strawberries. Q=0 TU=0; Q=1 TU=9 Q=2 TU=14; Q=4 TU=18; Q=5 TU=21; Q=6 TU=23; Q=7 TU=24

EXTENSION ACTIVITY

In this activity you will see how to make decisions on the margin using your TI-83 Graphing calculator. Suppose that marginal utility for rock polishers is given by the formula,Y1=iPart((1/(2X^.5)*100)). Suppose the price of rock polishers is given by the formula, Y2=25. Key these formulas into your calculator and graph. Using your table function, verify that four rock polishers would be bought? Now change the price in Y2 to 18. How many rock polishers would be purchased now? Explain how marginal utility proves the law of demand.