AP Microeconomics - Topic 1.6: Marginal Analysis and Consumer Choice

Consumer choice theory

Relates consumers' wants and preferences to the goods and services they actually buy

Diminishing marginal utility

Decreasing satisfaction or usefulness as additional units of a product are acquired

Marginal utility

the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product

Marginal benefit

the additional benefit to a consumer from consuming one more unit of a good or service

Marginal analysis

the study of the costs and benefits of doing a little bit more of an activity versus a little bit less

Marginal cost

Extra cost of producing one additional unit of production.

Optimal quantity

the quantity that generates the maximum possible total net gain

Utility maximization rule

individuals maximize total satisfaction when consuming where the marginal utility per dollar is equal for all goods and services