Consumer Demand and Utility Theory

Question 1

Define “marginal utility”.

Answer 1

The utility derived from each (additional) marginal unit (i.e., from the last unit acquired).

Question 2

Define the “law of diminishing marginal utility”.

Answer 2

Decreasing utility (satisfaction) is derived from each additional (marginal) unit of a commodity acquired.

Question 3

Define “utility”, as used in economics.

Answer 3

Satisfaction derived from the acquisition or use of a commodity.

Question 4

What is represented by an indifference curve?

Answer 4

Various quantities of two commodities that give an individual the same total utility as plotted on a graph.

Question 5

Define “utils”, as used in economics.

Answer 5

Hypothetical unit of measure used to measure satisfaction derived from a commodity.