How markets work

Question 1

What is utility?

Answer 1

Satisfaction gained from consumption

Question 2

What is marginal utility?

Answer 2

Additional satisfaction from consuming one more unit

Question 3

What is marginal cost?

Answer 3

The cost of producing one more unit

Question 4

What is marginal revenue?

Answer 4

The revenue from selling one more unit

Question 5

What causes movements along the demand curve?

Answer 5

Due to price changes

Question 6

What causes shifts in the demand curve?

Answer 6

Caused by non price factors (income, preferences)

Question 7

What is diminishing marginal utility?

Answer 7

As more units are consumed, additional satisfaction decreases

Question 8

Normal goods

Answer 8

Demand rises as income increases

Question 9

Inferior goods

Answer 9

Demand falls as income increases

Question 10

Substitutes

Answer 10

If the price for a substitute increases, demand for the original good rises

Question 11

Complements

Answer 11

If the price of complement rises, demand for the original good falls