The third reading assignment for Unit 1 is pp. 536-549.

Study the table and graph on the top of p. 539 regarding total v. marginal utility. As the number of pizza slices increases, total utility rises while marginal utility decreases. That is, total utility will continue to increase as long as marginal utility is positive. Note that marginal utility can diminish and still be positive. However, at some level of high consumption (i.e., eight slices), marginal utility is zero. There is only so much pizza that can be eaten at one time. When this occurs, total utility will stop increasing. If the consumer persists in eating yet another slice (the ninth one), marginal utility actually becomes negative. When this happens, total utility will begin to decline. However, a rational consumer should not continue to purchase a product that is associated with negative marginal utility. A sensible consumer would switch to buying a different product, one that has positive marginal utility for that consumer.

One conceptual difficulty with the utility concept is that it can't be measured precisely. If you order a pepperoni pizza this evening you will certainly receive some utility (i.e., benefit, satisfaction) from it as it is consumed. In economics, the satisfaction or benefit you obtain is sometimes called "utils". But how many do you receive? It is clear that if you order another pizza one hour hour later, the marginal benefit or utils you receive will be less. In other words, the diminishing marginal utility concept applies. In the fourth reading assignment for Unit One, you will be introduced to income constraints and indifference curves. This is a more precise method that avoids the difficulty of trying to quantify utility. If you go on to study intermediate microeconomics or price theory, you will learn about indifference curves in more detail.

Study the table on p. 542 on how to maximize utility.

Read the added dimension: income and substitution effects on p. 544.

Look at the chapter summary on p. 549.