LS14 - Diminishing Marginal Utility Flashcards
1
Q
Tax Revenue
A
Tax Rate x Quantity Sold
2
Q
Government Spending
A
Subsidy Rate x Quantity Sold
3
Q
Income Effect
A
Assuming a fixed level of income, as price falls the amount that consumers can afford increases and therefore demand increases.
4
Q
Marginal Utility
A
The utility or satisfaction obtained from consuming one extra unit of a good or service.
5
Q
Diminishing Marginal Utility
A
As successive units of a good are consumed, the utility gained from each extra unit will fall.
6
Q
Maximum Satisfaction
A
Total satisfaction is maximised when marginal utility is zero - there is no more satisfaction from an extra unit of the good or service.
