lu 6

Question 1

utility

Answer 1

Satisfaction/pleasure derived from goods or Services

Question 2

cardinal and ordinal utility

Answer 2

(cardinal)Utility can be measured in some way and assigned numeric values
(Ordinal ) Preferences are ranked without measurable units

Question 3

marginal utility

Answer 3

additional satisfaction of one more unit of a good

Question 4

total utillity

Answer 4

sum of all marginal utilities from units consumed

Question 5

law of diminshing demand

Answer 5

As you consume more units, satisfaction decreases

Question 6

weighted marginal utility $

Answer 6

decides customer satisfaction per rand spent
marginal utility divided by price

Question 7

consumer Equillibrium

Answer 7

marginal utility A divided by price a =
marginal utility B divided by Price B

Question 8

conditions for equillibrium

Answer 8

combinations must be in budget
wmu’s must be equal across goods

Question 9

law of equalising the WMU

Answer 9

The consumer is happiest when every rand spent gives the same amount of satisfaction

Question 10

indifference curve

Answer 10

combinations of two goods that give the same leve of satisfaction

Question 11

assumptions

Answer 11

completedness can compare and rank all combinations
non satiation more is better than less
Consistency a is preferred over b, c, and d, as it is assumed a is better than c

Question 12

properties of a indifference curve

Answer 12

-shape varies per consumer
-shows a combination for a particular consumer
Each level of satisfaction will have a unique indifference curve
downwards sloping
bulges inwards
never intersect
The higher the curve more satisfaction

Question 13

law of substitution Marg

Answer 13

If one good is scarcer, its value increases relative to the other; it will be substituted with another good

Question 14

marginal rate substitution

Answer 14

The rate at which a consumer is willing to give up some of one good for more of another

Question 15

budget line

Answer 15

all combinations of goods that a consumer can afford, given their income and prices

Question 16

consumer equillibrium

Answer 16

where the indifference curve touches the budget line

Question 17

changes in equilibrium budget line indiffernce curve

Answer 17

change in income
The budget line switches out
may buy more or less, depending on normal or inferior goods
change in price
The budget becomes steeper

Question 18

income and substitution effect

Answer 18

substitution effect
when meat becomes cheaper you buy more and less bread