2.1 consumer behaviour

Question 1

marginal definition

Answer 1

looking at the effect of one more of something, economic agents make their decisions based on marginal gains

Question 2

marginal product

Answer 2

the amount of extra output produced by an extra unit of input, eg marginal product of labour - extra out our produced by one more worker

Question 3

marginal utility

Answer 3

extra benefit to an individual from consuming a good or service, can change the more you consume

Question 4

marginal revenue

Answer 4

change in total revenue from selling an extra good or service

Question 5

marginal cost

Answer 5

extra cost of production that a firm incurs when producing one more good or service

Question 6

diminishing marginal utility

Answer 6

the concept that the more you consume the less utility gained is gained from each additional unit - assuming all else is fixed

Question 7

diminishing marginal product

Answer 7

as they produce more, the firms will have to use less and less productive factors as they will have already used the best ones

Question 8

what determines level of consumption

Answer 8

marginal utility from that good
utility from other goods
consumers budget
consumers preference

Question 9

when is utility maximised

Answer 9

the ratio of the prices of 2 goods should be equal to the ratio of the marginal utilities
eg - P1/P2 = MU1/MU2
total utility is maximised when marginal utility is 0

Question 10

what is total utility

Answer 10

the sum of marginal utilities