Economic Objectives

Question 1

Economists use the concept of

Answer 1

margin

Question 2

the margin is

Answer 2

the change in a variable caused by an increase of one unit of another variable.

Question 3

Economic agents are assumed to be

Answer 3

utility maximisers

Question 4

what does utility mean

Answer 4

roughly means well being, happiness, satisfaction

Question 5

Understand how consumers act rationally

Answer 5

to understand how consumers act rationally you need to know about marginal utility, total utility, law of diminishing marginal utility

Question 6

marginal utility

Answer 6

the benefit gained from consuming one additional unit of a good.

Question 7

total utility

Answer 7

the overall benefit gained from consuming a good.

Question 8

law of diminishing marginal utility

Answer 8

states that for each additional unit of a good consumed the marginal utility gained decreases.

Question 9

rational consumer

Answer 9

will choose to consume a good at the point where marginal utility = price

Question 10

if marginal utility decreases with each extra good consumed then

Answer 10

the price a consumer is willing to pay for each extra good will decrease. this explains why demand curve slopes downwards.

Question 11

different economic agents

Answer 11

will have different economic objectives