Chapter 6: Consumer Behaviour

Question 1

Utility

Answer 1

The satisfaction that a consumer receives from consuming some good or service

Question 2

Total utility

Answer 2

Total satisfaction resulting from the consumption of a given commodity by a consumer

Question 3

Marginal utility

Answer 3

The additional satisfaction obtained from consuming one additional unit of a commodity

Question 4

Real income

Answer 4

Income expressed in terms of the purchasing power of money income - that is, the quantity of goods and services that can be purchased with the money income

Question 5

Substitution effect

Answer 5

The change in the quantity of a good demanded resulting from a change in its relative price (holding relative income constant)

Question 6

Income effect

Answer 6

The change in the quantity of a good demanded resulting from a change in real income (holding relative prices constant)

Question 7

Giffen good

Answer 7

An inferior good for which the income effect outweighs the substitution effect so that the demand curve is positively sloped

Question 8

Consumer surplus

Answer 8

The difference between the total value that consumers place on all units consumed of a commodity and the payment that they actually make to purchase that amount of the commodity