Learning objectives
Explain rational decision-making as comparing marginal benefit with marginal cost and choosing every unit for which marginal benefit is at least marginal cost
Distinguish explicit (out-of-pocket) costs from implicit (opportunity) costs and include both in a full cost–benefit comparison
Define total utility and marginal utility and explain the law of diminishing marginal utility
Apply the utility-maximizing rule: spend a fixed budget so that marginal utility per dollar is equal across goods (MUx/Px = MUy/Py)
Predict how a change in a good's price or in income changes the consumer's optimal bundle
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