1.2.1 Rational decision making Flashcards
1
Q
What is utility ?
A
Satisfaction
2
Q
What is total utility ?
A
Total utility is overall benefit gain from consuming a good
3
Q
What is marginal utility ?
A
This is the benefit gain from consuming one additional unit of a good
4
Q
What is the law of diminishing marginal utility ?
A
For each additional unit of a good that’s consumed, the marginal utility will decrease
5
Q
What do economic agents act to do ?
A
They act to maximise net benefits. For consumers it would be to maximise utility from consuming goods
6
Q
What is the difference between traditional and behavioural economics ?
A
Traditional economists believe consumers are always rational and always look to maximise utility.
Behavioural economists believe consumers are not rational so may not to look maximise utility
