Consumer Sector

Question 1

Prices are important in determining consumer behavior

Answer 1

New products have to be price correctly.

Question 2

Preferences do not equal choices

Answer 2

consumer choice

Question 3

preferences determine the benefits or satisfaction a person receives consuming a good or service

Answer 3

consumer choice

Question 4

amount of satisfaction of benefit a person receives from the consumption of a good or service

Answer 4

utility

Question 5

The more pleasure we get from a product, the higher the price we’re paying for it

Answer 5

Utility theory

Question 6

Total benefit or satisfaction received from the consumption of series of products

• -depends on level of consumption
• -subjective

Answer 6

Total Utility

Question 7

• -extra satisfaction derived from 1 additional unit of a specific product
• -change in total utility that results from 1 unit increase in the quantity of a good consumed

Answer 7

marginal utility

Question 8

Assumes people choose the consumption possibility that maximizes their total utility
-People’s wants exceed the resources available to satisfy those wants

Answer 8

Marginal Utility Theory

Question 9

successive units of a product yield smaller and smaller amounts of marginal utility so the consumer will buy more only if P falls

Answer 9

Law of Diminishing Marginal Utility

Question 10

the more of a specific product consumers obtain, the less they will desire more units of that product

Answer 10

law of diminishing Marginal Utility

Question 11

amount by which marginal utility declines as more units of a product are consumed helps determine that product’s price elasticity of D

Answer 11

Law of diminishing Marginal Utility

Question 12

As long as marginal utility >0, ____

Answer 12

total utility increases

Question 13

When marginal utility becomes negative, ___

Answer 13

total utility maxes out and then decreases

Question 14

if marginal utility declines in big steps, a small change in quantity brings a big change in marginal utility per $ spent, D is Elastic

Answer 14

Law of Diminishing Marginal Utility

Question 15

If marginal utility declines slowly and a large change in Q brings a small change in marginal utility per $ spent, D is inelastic

Answer 15

Law of Diminishing Marginal Utility

Question 16

The more marginal utility a product delivers, the more we are willing to pay for it, and vice versa

Answer 16

Price and Quantity

Question 17

As marginal utility diminishes, we buy additional quantities only if the price decreases

Answer 17

Price and Quantity

Question 18

The law of demand states that the quantity of a good demanded in a given time period increases as its price falls, ceteris paribus

Answer 18

Price and Quantity

Question 19

Goal of consumer is maximize total utility

Answer 19

marginal utility per $ spent is = for all goods

Question 20

When consumer has allocated all available income in a way that maximized total utility

Answer 20

consumer equilibrium

Question 21

no incentive exits to alter expenditure pattern unless tastes, income or prices change

Answer 21

consumer equilibrium

Question 22

Utility maximized when budget is completely spent and marginal utility of a good divided by its price is identical for the last unit of each good

Answer 22

consumer equilibrium

Question 23

In equilibrium, higher priced goods must yield more marginal utility to compensate

Answer 23

consumer equilibrium

Question 24

The spending of money for and the acquiring of luxury goods and service to publicly display economic power, either the buyer’s income or the buyer’s accumulated wealth

Answer 24

Thorstein Veblen