Handout 3 (rational economic decision making) Flashcards
1
Q
What do consumers aim to maximise
A
Welfare
2
Q
Utility
A
The satisfaction or happiness an individual gains from consuming a good or service.
3
Q
Marginal Utility
A
additional satisfaction an individual derives from consuming one extra unit of a good/ service
4
Q
What is the equation for marginal utility?
A
Marginal Utility = Change in Total Utility/Change in quantity
5
Q
Total Utility
A
Aggregate sum of satisfaction an individual derives from consuming a given amount of a good or service
6
Q
Diminishing Marginal Utilltiy
A
For a single consumer the marginal utility derived for a good diminishes for each extra unity consumed
