Consumer behaviour

Question 1

Define utility

Answer 1

Means happiness, satisfaction or benefit

Question 2

Define marginal utility

Answer 2

the additionalutility (satisfaction/benefit/happiness)from consuming oneextraunit

Question 3

Define total utility

Answer 3

the total utility (happiness/benefit/satisfaction) from consuming all units in total

Question 4

Is diminishing marginal utility one reason for why the demand curve sloped down, yes or no?

Answer 4

Yes

Question 5

What do economists assume about utility?

Answer 5

Economists assume a rational consumer will make decisions which maximise utility

Question 6

What does the law of diminishing utility suggest?

Answer 6

marginal utility decreases as you consume more units

Question 7

Why does the demand curve slope downwards?

Answer 7

Since consumers receiveless benefitfrom each additional unit consumed, they are willing topay lessfor each extra unit. This means that, asquantity increases, theprice decreasesand so there is adownward sloping demand curve.

Question 8

Define utility maximisation?

Answer 8

when consumers aim to generate the greatest utility possible from an economic decision. Firms aim to generate the highest profits possible.

Question 9

Define thinking at margin?

Answer 9

thinking about the effect of an additional action

Question 10

Why is thinking at margin important?

Answer 10

It allows consumers to keep thinking ahead and consider how to maximise their utility now or in the future.