utility or satisfaction. Individuals are the only judge of their own utility. In general, greater consumption of a

good brings higher total utility. However, the additional utility people receive from each unit of greater

consumption tends to decline in a pattern of diminishing marginal utility.

We can find the utility-maximizing choice on a consumption budget constraint in several ways. You can add up

total utility of each choice on the budget line and choose the highest total. You can select a starting point at

random and compare the marginal utility gains and losses of moving to neighboring points—and thus

eventually seek out the preferred choice. Alternatively, you can compare the ratio of the marginal utility to

price of good 1 with the marginal utility to price of good 2 and apply the rule that at the optimal choice, the two

ratios should be equal:

6.2 How Changes in Income and Prices Affect Consumption Choices
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