Economics (McConnell), AP* Edition, 20th Edition

LO 7.1

Define and explain the relationship between total utility, marginal utility, and the law of diminishing marginal utility.

LO 7.2

Describe how rational consumers maximize utility by comparing the marginal utility-to-price ratios of all the products they could possibly purchase.

LO 7.3

Explain how a demand curve can be derived by observing the outcomes of price changes in the utility-maximization model.

LO 7.4

Discuss how the utility-maximization model helps highlight the income and substitution effects of a price change.

LO 7.5

Give examples of several real-world phenomena that can be explained by applying the theory of consumer behavior.

LO 7.6

(Appendix) Relate how the indifference curve model of consumer behavior derives demand curves from budget lines, indifference curves, and utility maximization.