2. Individual Economic Decision Making

Question 1

Hypothesis of diminishing marginal utility

Answer 1

For a single consumer, the marginal utility derived from a good or service diminishes for each additional unit consumed

Question 2

Rational behaviour

Answer 2

Acting in pursuit of self-interest, which for a consumer means attempting to maximise the welfare, satisfaction or utility gained from the goods and services consumed

Question 3

Utility

Answer 3

The satisfaction or economic welfare an individual gains from consuming a good or service.

Question 4

Marginal utility

Answer 4

The additional welfare, satisfaction or pleasure gained from consuming one extra unit of a good or service.

Question 5

Asymmetric information

Answer 5

When one party to a market transaction possesses less information relevant to the exchange than the other.