4.1.2 - indvidual economic decision making - consumer behaviour

Question 1

what is utility

Answer 1

satisfaction

Question 2

total utility

Answer 2

satisfaction gained after consuming the entire service or product

Question 3

marginal utility

Answer 3

the change in total utility obtained by consuming one additional unit of a good/service

Question 4

average utility

Answer 4

total utility / quantity

Question 5

law of diminishing utility

Answer 5

as quantity consumed increases the marginal utility derived from each extra unit decreases.

Question 6

total utility is maximised when

Answer 6

marginal utility = 0

Question 7

economists assume that price is =

Answer 7

utility

Question 8

how can rational consumer maximise utility

Answer 8

marginal utility = price

Question 9

how does mu = demand

Answer 9

the higher the price/utiles the less of one product a consumer can consumer in order to maximise utility.

Question 10

utility maximising theory

Answer 10

the consumer money income should be allocated so that the last pound spent on each product yields the same amount of extra marginal utility.