These Microeconomics A-Level Year 2 study notes offer a concise summary of all the essential graphs you need to know for your exams. Perfect for last-minute revision, the notes are clear, well-organized, and designed to help you understand and recall key concepts quickly. Whether you’re preparing...
,utify
Withincreasedconsumption TUincreases at a diminishingrate
reaches a maximum andthendeclines.MU falls withincreased
consumption becomes zerowhenTa is at maximumand is
negativewhen The declines.MU curve slopes downward illushin
awaits theprincipleof diminishing marginalutility
MU TU
Positive increases
Mansinal
utility maximum
of
point satiety
gltive decreases
si
Prise
e Utijty only buythe commodity untilthe
Rational consumerswill
marginal utilitythey gainfrom it exceedstheprice
paidfor it Asprice exceedsmarginalutility consumption
will decrease andthe equilibrium willbe at the point
p.MEption
fquilibrium
Tons
where both curves intersect
g Rational consumers will purchase additionalunits aslongas
I con's
ption
they gainadditional consumersurplus Asmoreunits are
1
consumed
MUdiminishes andtheywillbe willingtopaylessa
eachadditional unit.MUcontinues to
fall until Mu P CS
hasbeen maximised
Q
Quantity
Uti y Price
According to LDMU when consumer isinitially at a when
MUo Po if price ofthe product falls from Po to Pa
then Muo P The consumer will be in disequilibrium
Po A rationalconsumerwillbelikely to increase consumptionbeyo
doAccordingto Lnmu mu willfallwiththeincrease inconsumpt
Theconsumerwill reach a new equilibrium at b wheremy P
P 9
A curvejuing a and b shows the marginal
utilitycurve
1 MU D and is also the individualdemandcurve
Q
91 Quantity
, Print The horizontalsum
of
all the individualdemand
6 curves DA DB Dc
q y y for a product in a
1 I
1 I
I market willform the
1 market demandcurve
I t DM
a
It 1
i y y DCI
l g
I DM
Dal
210
30 is Quantity
Uti y Price
Suppose that a rational consumeris in equilibrium at a
Intially theperdollarmarginalutility for both goods X
and Y is equali
e.MY Myy If thepriceof
good
MUo
MY falls theperdollarmarginal utilityfrom good will
g
Po pox
immediately belomegreaterthan that ofgood Y i e
IM mu
7 M According to LEMU asthe consumption
P
I I pay My
of Xincreases its MU decreasesandImuof
I MU D starts increasing consumptionfalls Thiswill continue t
t
o
happen until lastunitspenton eithergoodgenerates t
91 Quantity same utility at b
My
Good Y
A Budgetline shows the maximum possible combinah
S unaffordable of 2 goods that the consumer can buy given a
fixed insome andpricesof goods
Income PxOx Pyay
and
C f If consumer spends the entirety ofincome on
good then Oy 0 Ox maximum
Ing
Budgetline The
slope ofthe budget line indicatesthe spending
trade off between onegood andanother
B M
Good
PPI
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