CHAPTER 5

Question 1

is a term that refers to consumers’ choices to maximize their satisfaction.

Answer 1

Consumer preference

Question 2

is an important concept in understanding consumer preference in economics and marketing.
-refers to the total satisfaction of consuming a good or service. It measures how much satisfaction a consumer gets from consuming a good or service.

Answer 2

Utility

Question 3

Properties of Consumer Preference

Answer 3

1. Completeness
2. Transitivity
3. More is Better

Question 4

n states that consumers are rational and make decisions based on all the information they have. This assumption is made because consumers control their own preferences and are not influenced by external factors.

Answer 4

Completeness

Question 5

This simply means that consumers are able to order their preferences in a logical way

Answer 5

Transitivity

Question 6

states that, all else the same, more of a commodity is better than less of it. Indeed, economists define a good as a commodity for which more is preferred to less, at least at some levels of consumption.

Answer 6

More is Better

Question 7

are heuristic devices used in contemporary microeconomics to demonstrate consumer preference and the limitations of a budget.
-used by economists to explain the tradeoffs that people consider when they encounter two goods that they wish to buy.

Answer 7

Indifference curves

Question 8

Four Properties of Indifference Curve:

Answer 8

1. Bundles on indifference curves farther from the origin are preferred to those on indifference curves closer to the origin.
2. An indifference curve goes through every possible bundle.
3. Indifference curves cannot cross.
4. Indifference curves slope downward.

Question 9

a _________________ represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income.

Answer 9

budget constraint

Question 10

The term ________________ refers to the fact that the consumer has no incentive to change to a different affordable bundle once this point is reached.

Answer 10

equilibrium

Question 11

All the bundles a consumer can buy, including all the bundles inside the budget constraint and on the budget constrain.

Answer 11

Opportunity Set

Question 12

An organization that converts inputs such as labor, materials, energy, and capital into outputs, the goods and services that it sells.

Answer 12

Firms