chapter 5- the consumer

Question 1

Consumer sentiment

Answer 1

Is a mathematical measure of the health of the economy as indicated by consumer opinion

Question 2

Rational consumer

Answer 2

Is a logical or reasonable consumer. He/she is able to make purchasing decisions using intelligent thinking rather than emotion.

Question 3

UTILITY

Answer 3

refers to the benefit that an individual gets from consuming a good or service.utility is measured in [ utils] SATISFACTION

Question 4

TOTAL UTILITY

Answer 4

refers to the total benefit that an individual gets from consuming a number of units of a good or service. TOTAL SATISFACTION

Question 5

MARGINAL UTILITY

Answer 5

refers to the extra benefit that an individual gets from consuming an extra unit of a good/service EXTRA CONSUMPTION OF A UNIT

Question 6

CONSUMER SENTIMENT

Answer 6

is a mathematical measure of the health of the economy as indicated consumer opinion

Question 7

CONSUMER BEHAVIOR

Answer 7

while no two consumers are the same,economists and policymakers make some generalizations or assumptions when formulating economic models about the way that consumers behave

Question 8

Impulse purchase

Answer 8

Is a purchase that is made on the spur of the moment that the consumer had not planned in advance.

Question 9

Economic good

Answer 9

Is transferable and is scarce relative to the demand for it

Question 10

The Law of Diminishing Marginal Utility

Answer 10

The Law of Diminishing Marginal Utility (LDMU) states that as a consumer consumes more units of a good, the extra satisfaction or marginal utility derived from each additional unit consumed will eventually decline.

Question 11

The Law of Equi-Marginal Returns

Answer 11

The Equi-Marginal Principle of consumer behaviour states that a consumer who wants to maximise utility will allocate his or her limited income so that the ratio of marginal utility to price (the marginal utility per euro spent) is the same (equal) for all goods he or she consumes, i.e
Marginal utility of good A
—————————————-
Price of good A
=
Marginal utility of good B
—————————————-
Price of good B

Question 12

Price elasticity of demand (PED)

Answer 12

Measures the percentage change in the quantity demanded of a good/service as a result of a percentage change in the price

Question 13

Relatively elastic

Answer 13

Demand for a good is relatively elastic if the percentage change in price is outweighed by the percentage change in quantity demanded.

Question 14

Relatively inelastic

Answer 14

Demand is relatively inelastic if the percentage change in price outweighs the percentage change in quantity demanded

Question 15

Unitary elastic

Answer 15

Demand for a good/service is unitary elastic if the percentage change in quantity demanded is equal to the percentage change in price

Question 16

Perfectly elastic

Answer 16

Demand for a good/service is elastic if demand falls to zero when there is a price rise

Question 17

Perfectly inelastic

Answer 17

Demand for a good is perfectly inelastic if there is no change in the quantity demanded when there is a price change

Question 18

Income Elasticity of Demand (YED)

Answer 18

Measures the percentage change in the quantity demanded of a good/service in response to a percentage change in income