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For José, the highest total utility for all possible combinations of goods occurs at point S, with a total utility of 103 from consuming one T-shirt and six movies.

Choosing with marginal utility

Most people approach their utility-maximizing combination of choices in a step-by-step way. This step-by-step approach is based on looking at the tradeoffs, measured in terms of marginal utility, of consuming less of one good and more of another.

For example, say that José starts off thinking about spending all his money on T-shirts and choosing point P, which corresponds to four T-shirts and no movies, as illustrated in [link] . José chooses this starting point randomly; he has to start somewhere. Then he considers giving up the last T-shirt, the one that provides him the least marginal utility, and using the money he saves to buy two movies instead. [link] tracks the step-by-step series of decisions José needs to make ( Key : T-shirts are $14, movies are $7, and income is $56). The following Work It Out feature explains how marginal utility can effect decision making.

A step-by-step approach to maximizing utility
Try Which Has Total Utility Marginal Gain and Loss of Utility, Compared with Previous Choice Conclusion
Choice 1: P 4 T-shirts and 0 movies 81 from 4 T-shirts + 0 from 0 movies = 81      –      –
Choice 2: Q 3 T-shirts and 2 movies 63 from 3 T-shirts + 31 from 0 movies = 94 Loss of 18 from 1 less T-shirt, but gain of 31 from 2 more movies, for a net utility gain of 13 Q is preferred over P
Choice 3: R 2 T-shirts and 4 movies 43 from 2 T-shirts + 58 from 4 movies = 101 Loss of 20 from 1 less T-shirt, but gain of 27 from two more movies for a net utility gain of 7 R is preferred over Q
Choice 4: S 1 T-shirt and 6 movies 22 from 1 T-shirt + 81 from 6 movies = 103 Loss of 21 from 1 less T-shirt, but gain of 23 from two more movies, for a net utility gain of 2 S is preferred over R
Choice 5: T 0 T-shirts and 8 movies 0 from 0 T-shirts + 100 from 8 movies = 100 Loss of 22 from 1 less T-shirt, but gain of 19 from two more movies, for a net utility loss of 3 S is preferred over T

Decision making by comparing marginal utility

José could use the following thought process (if he thought in utils) to make his decision regarding how many T-shirts and movies to purchase:

Step 1. From [link] , José can see that the marginal utility of the fourth T-shirt is 18. If José gives up the fourth T-shirt, then he loses 18 utils.

Step 2. Giving up the fourth T-shirt, however, frees up $14 (the price of a T-shirt), allowing José to buy the first two movies (at $7 each).

Step 3. José knows that the marginal utility of the first movie is 16 and the marginal utility of the second movie is 15. Thus, if José moves from point P to point Q, he gives up 18 utils (from the T-shirt), but gains 31 utils (from the movies).

Step 4. Gaining 31 utils and losing 18 utils is a net gain of 13. This is just another way of saying that the total utility at Q (94 according to the last column in [link] ) is 13 more than the total utility at P (81).

Step 5. So, for José, it makes sense to give up the fourth T-shirt in order to buy two movies.

Questions & Answers

how do you translate this in Algebraic Expressions
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Need to simplify the expresin. 3/7 (x+y)-1/7 (x-1)=
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. After 3 months on a diet, Lisa had lost 12% of her original weight. She lost 21 pounds. What was Lisa's original weight?
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I start with an easy one. carbon nanotubes woven into a long filament like a string
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many many of nanotubes
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what is the function of carbon nanotubes?
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I'm interested in nanotube
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what is nanomaterials​ and their applications of sensors.
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what is nano technology
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what is system testing?
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preparation of nanomaterial
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Yes, Nanotechnology has a very fast field of applications and their is always something new to do with it...
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good afternoon madam
AMJAD
what is system testing
AMJAD
what is the application of nanotechnology?
Stotaw
In this morden time nanotechnology used in many field . 1-Electronics-manufacturad IC ,RAM,MRAM,solar panel etc 2-Helth and Medical-Nanomedicine,Drug Dilivery for cancer treatment etc 3- Atomobile -MEMS, Coating on car etc. and may other field for details you can check at Google
Azam
anybody can imagine what will be happen after 100 years from now in nano tech world
Prasenjit
after 100 year this will be not nanotechnology maybe this technology name will be change . maybe aftet 100 year . we work on electron lable practically about its properties and behaviour by the different instruments
Azam
name doesn't matter , whatever it will be change... I'm taking about effect on circumstances of the microscopic world
Prasenjit
how hard could it be to apply nanotechnology against viral infections such HIV or Ebola?
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silver nanoparticles could handle the job?
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not now but maybe in future only AgNP maybe any other nanomaterials
Azam
Hello
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I'm interested in Nanotube
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this technology will not going on for the long time , so I'm thinking about femtotechnology 10^-15
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can nanotechnology change the direction of the face of the world
Prasenjit Reply
At high concentrations (>0.01 M), the relation between absorptivity coefficient and absorbance is no longer linear. This is due to the electrostatic interactions between the quantum dots in close proximity. If the concentration of the solution is high, another effect that is seen is the scattering of light from the large number of quantum dots. This assumption only works at low concentrations of the analyte. Presence of stray light.
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the Beer law works very well for dilute solutions but fails for very high concentrations. why?
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how did you get the value of 2000N.What calculations are needed to arrive at it
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Suppose that a 5% increase in the minimum wage causes a 5% reduction in employment. How would this affect employers and how would it affect workers? In your opinion, would this be a good policy?
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Source:  OpenStax, Openstax microeconomics in ten weeks. OpenStax CNX. Sep 03, 2014 Download for free at http://legacy.cnx.org/content/col11703/1.2
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