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HL / SL011. Introduction to Economics
022. Microeconomics
- 2.1 DemandHL / SL
- 2.2 SupplyHL / SL
- 2.3 Competitive Market EquilibriumHL / SL
- 2.4 Critique of the maximizing behaviour of consumers and producers (HL only)HL / SL
- 2.5 Elasticities of demandHL / SL
- 2.6 Elasticity of supplyHL / SL
- 2.7 Role of government in microeconomicsHL / SL
- 2.8 Market failure - externalities, common pool resources, public goods, asymmetric informationHL / SL
- 2.9 Market failure - public goodsHL / SL
- 2.10 Market Failure - asymmetric information (HL only)HL / SL
- 2.11 Market failure - market power (HL only)HL / SL
- 2.12 The market’s inability to achieve equity (HL only)HL / SL
033. Macroeconomics
- 3.1 Measuring economic activitiesHL / SL
- 3.2 Variations in economic activity - aggregate demand and aggregate supplyHL / SL
- 3.3 Macroeconomic objectivesHL / SL
- 3.4 Economics of inequality and povertyHL / SL
- 3.5 Demand management - Monetary policyHL / SL
- 3.6 Demand management - fiscal policyHL / SL
- 3.7 Supply side policiesHL / SL
044. The Global Economy
- 4.1 Benefits of International TradeHL / SL
- 4.2 Types of Trade ProtectionHL / SL
- 4.3 Arguments For and Against Trade ProtectionHL / SL
- 4.4 Economic IntegrationHL / SL
- 4.5 Exchange RatesHL / SL
- 4.6 Balance of PaymentsHL / SL
- 4.7 Sustainable DevelopmentHL / SL
- 4.8 Measuring DevelopmentHL / SL
- 4.9 Barriers to Economic Growth and Economic DevelopmentHL / SL
- 4.10 Economic Growth and Economic Development StrategiesHL / SL
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Law of Diminishing Marginal Utility (1/4)
Consumer theory begins with the idea of utility -- the satisfaction or benefit a person gains from consuming a good or service. Utility is subjective and cannot be measured in precise physical units, but economists find it useful to imagine it in "utils" purely to illustrate the underlying logic.
A crucial distinction is between total utility (the overall satisfaction gained from consuming a certain quantity of a good) and marginal utility (the additional satisfaction gained from consuming one more unit of that good). The law of diminishing marginal utility states that as a consumer consumes successive units of a good within a given time period, the additional (marginal) utility gained from each extra unit eventually falls, holding the consumption of all other goods constant.
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