Introduction to Consumer Choices
2. Consumption Choices
By the end of this section, you will be able to:
- Calculate total utility
- Propose decisions that maximize utility
- Explain marginal utility and the significance of diminishing marginal utility
Information on the consumption choices of Americans is available from the Consumer Expenditure Survey carried out by the U.S. Bureau of Labor Statistics. Table 6.1 shows spending patterns for the average U.S. household. The first row shows income and, after taxes and personal savings are subtracted, it shows that, in 2015, the average U.S. household spent $48,109 on consumption. The table then breaks down consumption into various categories. The average U.S. household spent roughly one-third of its consumption on shelter and other housing expenses, another one-third on food and vehicle expenses, and the rest on a variety of items, as shown. Of course, these patterns will vary for specific households by differing levels of family income, by geography, and by preferences.
| Average Household Income before Taxes | $62,481 |
| Average Annual Expenditures | $48.109 |
| Food at home | $3,264 |
| Food away from home | $2,505 |
| Housing | $16,557 |
| Apparel and services | $1,700 |
| Transportation | $7,677 |
| Healthcare | $3,157 |
| Entertainment | $2,504 |
| Education | $1,074 |
| Personal insurance and pensions | $5,357 |
| All else: alcohol, tobacco, reading, personal care, cash contributions, miscellaneous | $3,356 |