1.2

Question 1

define marginal utility

Answer 1

satisfaction gained from consuming each additional unit

Question 2

define diminishing marginal utility

Answer 2

satisfaction gained from consuming additional unit falls( the more you consumer, the less satisfaction you get)

Question 3

define utility

Answer 3

to maximise satisfaction

Question 4

how do producers maximise utility? vs how consumers maximize utility?

Answer 4

.producers = maximise utility by decreasing costs and making maximum profit.

.consumers= by maximising satisfaction

Question 5

define herd behaviour

Answer 5

when decisions are made based on the decisions other people around you make.

Question 6

define habitual behaviour

Answer 6

when decisions are influenced by previous habits, even if there is a cheaper alternative.

Question 7

define computational weakness

Answer 7

occurs when consumers find it difficult to calculate the probability of something happening when they make purchasing decisions

Question 8

define demand

Answer 8

the ability and willingness to purchase a good or service

Question 9

when does contraction and expansion happen of the demand curve?

Answer 9

.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

Question 10

what factors influence demand?

Answer 10

.(P)opulation PIRATES
.(I)ncome
.(R)elated goods
.(A)dvertising
.(T)aste/fashion
.(E)xpectation
.(S)easons

Question 11

define price elastic

Answer 11

when the % change in price is less than the % change in quantity (PED>1)

Question 12

define price inelastic

Answer 12

when the % change in price is greater than the % change in quantity (PED<1 but greater than 0)

Question 13

define perfectly price elastic

Answer 13

when demand changes due to no change in price( % change in price is 0) (PED= infinity)