Utility maximisation
Consumers maximise utility by spending their money so that each purchase gives them the greatest possible satisfaction. They keep buying a good until the extra satisfaction it delivers no longer justifies its price.
Formula
MU₁/P₁ = MU₂/P₂ = ... = MUn/Pn
Real World
When Spotify offered a student plan at £4.99/month, students who previously bought CDs reallocated spending because the marginal utility per pound from streaming exceeded that from physical music.
Exam Focus
Always apply the equi-marginal principle formula when asked to 'explain' utility maximisation — examiners expect it explicitly.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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