the consumer Flashcards
chapter2
consumer def.
an individual who makes the decision whether to buy goods and services
what is utility
the amount of benefit or satisfaction derived from the consumption of a good or service
assumptions on consumer behavior
they have limited incomes,
seek maximum utility,
act rationally,
are subject to the law of diminishing marginal utility
Charakteristics of economic goods
must command a price, must provide utility,
must be transferable
marginal utility (MU)
is the addition to total utility (TU) brought about by the extra utility received by the consumption of one extra unit of a good.
the extra satisfaction a consumer gets by consuming an extra unit of the good
the law of diminishing marginal utility
states that as more units of a good are consumed , a point will be reached where marginal (extra) utility eventually begins to decline .
assumptions underlying the law of diminishing marginal utility
only after the origin,
sufficient time has not elapsed,
income doesn’t change,
no addictive goods/medicines,
what commodities do not comply with the LOMR.
medicine, addictive goods
consumer equilibrium
is the condition where there is no tendency for change
equi-marginal utility principle
explains the behavior of a consumer in distributing their limited income among various goods and services
what is an util
1 unit of satisfaction
formula of MU
MUx/Px = MUy/Py =……..= MUn/Pn
state examples of commodities which would not be considered as economic goods.
FRESH AIR: is plentiful in supply/not scarce, commands no price
WEEDS: provide us with no utility, command no price
BEAUTY & HEALTH: are not transferable
