1.1 Micro Flashcards
What is individual demand known as?
Utility
What is utility measured in?
Utils
What is utility?
The satisfaction derived from consuming a good or service
What is maximisation?
When an economic agent tries to gain the most from an economic activity
What do household look to do?
Maximise utility and gain the most satisfaction
What do firms wish to do?
Maximise profits
What does the government wish to do?
Maximise the welfare of the population
What are the FOP?
Land
Labour
Enterprise
Capital
Name the economic agents
Households
Government
Firms
What is profit satisficing?
A level of profit below profit maximum, but satisfies the need of the owner
What is the utility theory?
The satisfaction that an individual derives from consuming a good or service
What is total utility?
The aggregate amount of satisfaction
What is marginal utility?
The amount of satisfaction an individual derives from consuming one extra unit
What does total utility do over time?
Diminishes
Why does total utility diminish over time?
The consumer becomes satiated
How do you calculate marginal utility?
Change in total utility/ change in number of units consumed
Consumer will only consume after satiating because of what?
A decrease in price
How do you work out the maximum utility gained from a good or a service?
MUx/Px
