Ch. 10 Consumer Choice and Behavioral Econ.

Question 1

Utility

Answer 1

the enjoyment or satisfaction people receive from consuming goods and services

Question 2

Marginal Utility

Answer 2

the change in total utility a person receives from consuming one additional unit of a good/service

Question 3

Law of Diminishing Marginal Utility

Answer 3

the idea that consumers experience diminishing addition satisfaction as they consumer more of a good/service over a given period of time

Question 4

Budget Constraint

Answer 4

the limited amount of income available to consumers to spend on goods and services

Question 5

Income Effect

Answer 5

the change in quantity demanded of a good that resulted from a change in price on consumer purchasing power (all else constant)

Question 6

Substitution Effect

Answer 6

change in quantity demanded that results from a change in price making the good more or less expensive compared to other goods (all else constant)

Question 7

Opportunity Cost

Answer 7

the highest-valued alternative that must be given up in order to engage in an activity