Chapter 5: Consumer Choice Flashcards
What is the Freudian reasoning behind consumer behavior?
Security, Sex, and Ego
What is the Economic Explanation behind consumer behavior?
Demand, the willingness to buy and if a product is affordable
The Determinants of Demand Include what?
It includes consumer tastes, income, expectations, and the availability of alternative goods
What is Utility Theory?
How much pleasure a product gives off influences how much we are willing to pay for it
What is Utility?
Expected Satisfaction received from a good or service
What is Total Utility?
The total satisfaction from consuming a product
What is Marginal Utility?
How much satisfaction is given after consuming the last unit of a product
The Marginal Utility Formula
Change in total utility / Change in Quantity
A consumer will be willing to buy a product when what happens?
When either the product gives more marginal utility, and or the price falls.
Law of Diminishing Marginal Utility
Additional units of a good yield less additional utility
When does total utility increase?
Only when marginal utility is positive
What happens when a good is increasingly consumed?
Its marginal utility gradually gets smaller
Law of Demand
Demand rises as prices fall creating a downward sloping demand curve
Market Demand
The sum of all demands for a product, usually in the thousands
Consumer Surplus
The difference between max price a consumer is willing to pay, and how much is actually paid
