1.2 Flashcards
(16 cards)
define marginal utility
satisfaction gained from consuming each additional unit
define diminishing marginal utility
satisfaction gained from consuming additional unit falls( the more you consumer, the less satisfaction you get)
define utility
to maximise satisfaction
how do producers maximise utility? vs how consumers maximize utility?
.producers = maximise utility by decreasing costs and making maximum profit.
.consumers= by maximising satisfaction
define herd behaviour
when decisions are made based on the decisions other people around you make.
define habitual behaviour
when decisions are influenced by previous habits, even if there is a cheaper alternative.
define computational weakness
occurs when consumers find it difficult to calculate the probability of something happening when they make purchasing decisions
define demand
the ability and willingness to purchase a good or service
when does contraction and expansion happen of the demand curve?
.when prices increase and Quantity decreases, contraction happens on the demand curve.
.when prices decrease and Quantity increases, extension happens on the demand curve
. Quantity is inversely proportional to price
what factors influence demand?
Necessity/luxury
Addictive or not
Substitutes
Branding(how strong is branding)
Income
Time
define price elastic
when a % change in price leads to a larger % change in quantity
define price inelastic
when a % change in price leads to a smaller % change in quanity
define perfectly price elastic
when demand changes due to no change in price( % change in price is 0) (PED= infinity)
what factors cause supply to shift? (non-price)
Time
E(state of the economy)
Avaliability of factors
Spare capacity
Stockpiles & perishability
TEASS
what lead to a contraction or extension in supply?
changes in price
