Consumer Choice and Demand

Question 1

law of diminishing marginal utility

Answer 1

the more of a good a person consumes per period, the smaller the increase in total utility from consuming one more unit, other things constant.

Question 2

consumer equilibrium

Answer 2

the condition in which an individual consumer’s budget is exhausted and the last dollar spent on each good yields the same marginal utility; therefore, utility is maximized.

Question 3

Maximize utility equation

Answer 3

MUp/Pp = MUm/Pm

Question 4

marginal valuation

Answer 4

the dollar value of the marginal utility derived from consuming each additional unit of a good.

Question 5

consumer surplus

Answer 5

the difference between the most a consumer would pay for a given quantity of a good and what the consumer actually pays.