CH6: The Theory of Demand: The Utility Approach

Question 1

What are the different types of supply elasticity?

Answer 1

es = ∞. Any quantity supplied at a given price.

Question 2

What is utility, total utility, and marginal utility in economics?

Answer 2

The total satisfaction received from consuming a good or service. / Marginal utility decreases as more units of a good are consumed. / The additional utility gained from consuming one more unit of a product. / The total satisfaction from all units of a product consumed.

Question 3

what is cardinal utility?

Answer 3

A measurable form of utility using ‘utils’.

Question 4

what is consumer equilibrium in the utility approach?

Answer 4

When a consumer maximizes total utility and MU/Price is equal across all goods.

Question 5

what is ordinal utility?

Answer 5

Ranking preferences without assigning numerical values.

Question 6

what is the formula for consumer equilibrium with three goods?

Answer 6

MU_B/P_B = MU_M/P_M = MU_R/P_R

Question 7

what must be true for consumer equilibrium?

Answer 7

All income is spent and weighted marginal utilities are equal.