Consumer Choice

Question 1

The satisfaction or happiness received from the consumption of goods and services

Answer 1

utility

Question 2

The total satisfaction or happiness received from the consumption of a good, service, or combination of goods and services.

Answer 2

total utility

Question 3

The additional satisfaction or happiness received from the consumption of an additional unit of a good or service

Answer 3

marginal utility = change in total utils / change in quantity

Question 4

A subjective measure of the utility associated with consuming a good or service

Answer 4

util

Question 5

A principle in economics that states that the marginal utility associated with the consumption of a good or service becomes smaller with each extra unit that is consumed in a given time period

Answer 5

law of diminishing marginal utility

Question 6

The process of obtaining the greatest level of overall satisfaction or happiness from consuming goods and services

Answer 6

utility maximization

Question 7

The idea that consumers maximize their utility when they allocate their limited incomes so that the marginal utility per dollar spent on each of their final choices in a bundle is equal.

Answer 7

Equal marginal principle = MU a/Price a = MU b/Price b

Question 8

A line showing the different combinations of two products that can be purchased with a given budget and at known set of prices

Answer 8

budget line

Question 9

A curve that shows the combinations of two products that generate the same amount of total utility or satisfaction

Answer 9

indifference curve

Question 10

Three characteristics of indifference curves

Answer 10

1. Downward-sloping
2. Ones further from the origin are preferred
3. Cannot cross