Maximizing Utility Economists assume that consumers behave in a manner consistent with the maximization of utility To see how consumers that, we will put the marginal decision rule to work First, however, we must reckon with the fact that the ability of consumers to purchase goods and services is limited by their budgets The Budget Constraint The total utility curve in Figure 7.1 "Total Utility and Marginal Utility Curves" shows that Mr Higgins achieves the maximum total utility possible from movies when he sees six of them each month It is likely that his total utility curves for other goods and services will have much the same shape, reaching a maximum at some level of consumption We assume that the goal of each consumer is to maximize total utility Does that mean a person will consume each good at a level that yields the maximum utility possible? The answer, in general, is no Our consumption choices are constrained by the income available to us and by the prices we must pay Suppose, for example, that Mr Higgins can spend just $25 per month for entertainment and that the price of going to see a movie is $5 To achieve the maximum total utility from movies, Mr Higgins would have to exceed his entertainment budget Since we assume that he cannot that, Mr Higgins must arrange his consumption so that his total expenditures not exceed his budget constraint: a restriction that total spending cannot exceed the budget available Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 357