Chapter 3 Section Reviews Flashcards
Who identified the principle of diminishing marginal utility?
William Stanley Jevons
What does that principle state?
People tend to receive less and less additional satisfaction from any good or service as they obtain more and more of it during a specific time.
What are the three functions of prices?
1) Prices transmit information
2) They provide incentives
3) Redistribute income
What is the economic definition of the word demand?
The act of buying goods or services
State the law of demand.
Everything else being held constant, the lower the price charged for a good or service, the greater the quantity people will demand and the high the price, the lower the quantity they will demand.
What is the name of the graph that illustrates the demand for certain products?
Demand Curve
What four conditions may change the demand for a product?
1) Change in people’s incomes
2) Change in the price of related goods
3) Change in people’s tastes and preferences
4) Change in people’s expectations
According to Jevons, when an individual makes a decision at the margin, how does he determine the amount to obtain?
The individual chooses to obtain the amount at which the marginal benefit just offsets the marginal costs.
