M7

Question 1

Is a fundamental concept in economics that refers to the satisfaction or pleasure a consumer derives from consuming goods and services.

Answer 1

UTILITY

Question 2

It helps explain consumer behavior and how choices are made based on preferences and perceived value.

Answer 2

UTILITY

Question 3

measures the satisfaction or pleasure derived from consuming goods and services.

Answer 3

UTILITY

Question 4

Utility types

Answer 4

• CARDINAL UTILITY
• ORDINAL UTILITY

Question 5

measures utility in absolute terms, assigning specific numerical values to the satisfaction derived from consumption. This approach assumes that the magnitude of satisfaction can be quantified and compared.

Answer 5

CARDINAL UTILITY

Question 6

Measures satisfaction in absolute terms with specific numerical values, allowing for detailed comparison and mathematical analysis.

Answer 6

CARDINAL UTILITY

Question 7

ranks preferences without assigning specific numerical values to the satisfaction levels. It focuses on the order of preferences rather than the magnitude of satisfaction.

Answer 7

ORDINAL UTILITY

Question 8

Focuses on ranking preferences without quantifying the exact level of satisfaction, reflecting a more practical approach to understanding consumer choices.

Answer 8

ORDINAL UTILITY

Question 9

As a person consumes more units of a good, the additional satisfaction (marginal utility) from each additional unit will eventually decrease.

Answer 9

LAW OF DIMINISHING MARGINAL UTILITY

Question 10

are assumptions that underpin the way consumers make choices and evaluate their options.

Answer 10

RATIONAL PREFERENCES

Question 11

These assumptions ensure that consumer preferences are consistent and can be used to predict behavior.

Answer 11

RATIONAL PREFERENCES

Question 12

Key assumptions of rational preferences

Answer 12

• COMPLETENESS
• NON-SATIATION
• TRANSITIVITY

Question 13

means that for any two
bundles of goods, a consumer can always make a preference or state indifference between them.

Answer 13

COMPLETENESS

Question 14

assumes
that more of a good is always better than less of that good, provided all other goods are held constant.

Answer 14

NON-SATIATION (MONOTONICITY)

Question 15

means that if a consumer
prefers bundle A over bundle B and prefers bundle B over bundle C, then the consumer must also prefer bundle A over bundle C.

Answer 15

TRANSITIVITY

Question 16

This assumption ensures that consumer preferences are consistent and logically ordered.

Answer 16

TRANSITIVITY

Question 17

are fundamental for understanding consumer behavior in economics.

Answer 17

ASSUMPTIONS OF RATIONAL PREFERENCES

Question 18

They provide a framework for predicting how consumers make choices and evaluate their options in a consistent manner.

Answer 18

ASSUMPTIONS OF RATIONAL PREFERENCES

Question 19

is a fundamental concept in microeconomics used to represent a consumer’s preferences.

Answer 19

INDIFFERENCE CURVE

Question 20

It shows all the combinations of two goods that provide the same level of satisfaction or utility to the consumer.

Answer 20

INDIFFERENCE CURVE

Question 21

is a graph that represents all the combinations of two goods between which a consumer is indifferent.

Answer 21

INDIFFIRENCE CURVE

Question 22

are a crucial tool for analyzing consumer preferences and choices.

Answer 22

INDIFFERENCE CURVE

Question 23

They help illustrate how consumers make trade-offs between different goods to maintain the same level of satisfaction

Answer 23

INDIFFERENCE CURVE