Chapter 3

Question 1

Total utility

Answer 1

The total amount of utility a person gets from consuming a single product or a combination of products

Question 2

Marginal utility

Answer 2

The extra utility one gets from consuming an additional unit of a good or service.
MU= change in total utility / quantity

Question 3

Theory of consumer behavior (Algebraic Re statement)

Answer 3

MU of product A / price of a = MU of product B / price of b

Question 4

Optimum achieved

Answer 4

The money spent so the last rand = most utility or same extra utility

Question 5

Income effect

Answer 5

The impact a change in price of a product has on consumers real income and the quantity demanded by consumers

Question 6

Substitution effect

Answer 6

The impact a change in product price will have on its expensiveness and quantity demanded

Question 7

Budget line (constraint)

Answer 7

A schedule or curve that shows combinations of to products a consumer can purchase with a specific money income.

Question 8

Indifference curve

Answer 8

Shows a,l combinations of products A and B that will yield the same total utility to the consumer. Hence. The consumers choice will be indifferent as to which combinations are obtained.