Professional Documents
Culture Documents
First
Second
Third
MUFourth
Fifth
sixth
Total
Utility
(TU)
Marginal
Utility (MU)
40
70
90
100
100
90
40
30
20
10
0
-10
Q
a. Cardinal Approach
1) Gossens Law I
Total Utility is the total satisfaction with the
entire goods and services consumed Utilitas
total adalah seluruh kepuasan total dengan
barang dan jasa yang dikonsumsi
Marginal Utility is addition of satisfaction when
one consumes goods or services continuously
Utilitas Marjinal adalah penambahan kepuasan
ketika seseorang mengkonsumsi barang atau
jasa secara terus menerus
b. Cardinal Approach
1) Gossens Law I
Because Gossens Law I also explains marginal utility (MU) is
also known as the law of diminishing marginal utility
penurunan utilitas marjinal
100
90
80
70
Table and graph of TotalUtility
TU and Marginal Utility by Gossens law I
60
50
Food
Total
Marginal
40
Consumpti Utility
Utility (MU)
30
on
(TU)
20
TU, MU
10
First
40
40
Second
70
30
Third
90
Fourth
100
20
1
10
Fifth
100
sixth
90
MU
2
-10
a. Cardinal Approach
2) Gossens Law II
a. Cardinal Approach
2) Gossens Law II
100
90
80
70
60
50
a. Cardinal Approach
40
2) Gossens Law II
30
20
The use of money that he earned is shown:
10
The satisfaction value
Position
of money
Meals
Clothing
House
rent
Transportati
1
2
3
on
Educational
4
5
6
Course
10
10
a. Cardinal Approach
2) Gossens Law II
The explaination of how to use all ten Rp. 20.000,- bank notes for each type of
need is as follow:
Positio
n of
money
Clothi
ng
Hous
e rent
Transportati
on
Education
al Course
10
10
MUA
MUB
=
mathematically as follow:
PA
PB
Example:
Mr. Heru has an income of 140.000. He wishes to buy two types of goods,
goods A and goods B, each having a price of 10.000 and 20.000 per unit.
The values of the total utility and marginal utility are shown as follow:
Goods A
TU
MU
Goods B TU B
1
50
50
94
44
132
38
164
32
190
26
210
20
224
14
232
MU B
80
80
156
76
228
72
296
68
360
64
420
60
476
56
528
52
How many units of goods A and B should Mr. Heru buy so that he can attain a
maximum satisfaction from consuming these two types of goods, providing that
Mr. Heru has to spend all his income on these goods?
Answer:
MUA
MUB
=
PA
PB
We can see some combinations of marginal utility values that can satisfy:
-
Goods A
TU
MU
Goods B TU B
1
50
94
132
164
190
210
224
232
MUA
50
80
80
156
76
228
72
296
68
360
64
420
60
476
56
528
52
44
38
32
26
20
14
MU B
38
76
=
PA
=
PB
10.000
MUA
MUB
32
64
=
PA
=
PB
10.000
MUB
26
52
=
PA
Goods A
20.000
MUA
20.000
=
PB
10.000
TU
50
94
132
164
190
210
224
232
MU
20.000
Goods B
TU B
MU B
80
80
156
76
228
72
296
68
360
64
420
60
476
56
528
52
50
44
38
32
26
20
14
After this, we also have to determine whether Mr. Herus income can be all spent
from using one of these three pairs. We have to calculate how much money will
be spent for each pair.
= Rp. 70.000
= Rp. 210.000
b.
Ordinal Approach
b. Ordinal Approach
b. Ordinal Approach
An illustration of ordinal approach:
Doughnuts
Satisfaction point
Representation
12
- All points representing the consumption-mix of doughnuts and ice cream show
the level of satisfaction - Semua poin yang mewakili konsumsi-campuran donat
dan es krim menunjukkan tingkat kepuasan
- To maintain this same satisfaction level, every decrease in ice cream
consumption has to balanced by an increase in doughnut consumption - Untuk
mempertahankan tingkat kepuasan yang sama, setiap penurunan konsumsi es
krim harus diimbangi dengan peningkatan konsumsi donat
b. Ordinal Approach : An illustration of ordinal approach:
If the table is changed to a graphical form, then we have an indiference
curves.
Ice
Crea
m
Doughnu
ts
Satisfaction
point
Representat
ion
12
An Indifference curve located further from the point of origin (zero point)
shows a higher level of satisfaction
The satisfaction level of U3 is higher than that of U2, and U2 is higher that
of U1
Production
Definition of production
Production is an activity of increasing the usefulness (utility) of existing
goods or of increasing new goods which are useful for satisfying human
needs Produksi adalah kegiatan untuk meningkatkan kegunaan (utility)
barang yang ada atau barang baru peningkatan yang berguna untuk
memuaskan kebutuhan manusia
Purpose of production
In general the purpose of production is to satisfy human needs in
order to attain prosperity
For producers, the purpose of production is to make profits and to
ensure their companies survival
For consumers, the purpose of production is to provide various
goods and services to satisfy their needs.
Capital comprises goods which have been produced before and then used
in subsequent production processes to make other goods and services
4. Skill and entrepreneurship
Skill and entrepreneurship are knowledge and capabilities possessed by
someone that can be used to utilized other factors of production optimally
when producing goods and services
Theory of production:
Theory of production addresses the behavior of producers in producing
goods and services
A production function:
R - resources
C - capital
T - technology
L - Labor
An isoquant curve
An isoquant curve
Input combination to produce 50 units of output
Combina
tion
Outp
ut
Capi
tal
Lab
or
50
50
50
50
An isoquant curve
Total
Outp
ut
Margin
al
Produc
t
Avera
ge
Produ
ct
10
17
5,7
23
5,8
28
5,6
27
-1
4,5
ECONOMIC ACTORS