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2281 · 3.2

Households

**Households** (3.2) looks at how income is earned, spent, saved and borrowed, and why **utility** falls as more of a good is consumed. Link the idea of diminishing satisfaction to the downward-sloping **demand curve** (2.3).

Need to know

What you need to know

  • Utility is the satisfaction or economic welfare gained from consumption.
  • It is a subjective concept, varying between individuals and over time.
  • Economists use a hypothetical unit, 'utils', for theoretical analysis.
  • The core assumption is that rational consumers aim to maximise their total utility.

Explanation

Households

  1. Utility is the satisfaction or economic welfare gained from consumption.
  2. It is a subjective concept, varying between individuals and over time.
  3. Economists use a hypothetical unit, 'utils', for theoretical analysis.
  4. The core assumption is that rational consumers aim to maximise their total utility.
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