Chapter 8 - Utility And Demand Flashcards
1
Q
Utility
A
The benefit or satisfaction that a person gets by consuming goods and services.
2
Q
Total Utility
A
The total benefit a person gets from the consumption of goods. Generally, more consumption = more utility
3
Q
Marginal utility
A
The change in total utility resulting from a unit-increase in the quantity of the good consumed.
4
Q
Principle of diminishing marginal utility
A
As the quantity consumed of a good increases, the marginal utility from it decreases
5
Q
Marginal utility per rand
A
Extra utility you get for a product when you spend R1 extra on it.
6
Q
Utility maximizing rule
A
- spend all available income
- equalize marginal utility per Rand for all goods
- If MUx > MUy, buy more of MUx till MUx=MUy
