Micro 3 - consumer behaviour, utility and the demand curve Flashcards
What is utility?
The benefit or well-being (pleasure) gained from an action
What is marginal utility?
The benefit gained from consuming one additional unit of a good
What is total utility?
The overall benefit of consuming a good
What is the law of diminishing marginal utility?
The consumption of each additional unit of a good, decreases the marginal utility gained. For example, each additional biscuit gives less satisfaction than the last
What is equi-marginal utility?
It tells us that we should consume a product until a different product provides more utils per pounds, then we switch products
On a graph what happens when there is:
A Shift
An Extension and A Contraction
The shift is the movement of the entire demand curve in a diagram
An extension/contraction is going up and down a curve when prices change
What is quantity demanded?
The current quantity of a good or service people are willing and able to buy has changed, one reason could be the price
What is demand?
The quantity of a good or service consumes are both willing and able to buy at a range of price over a given period of time
What is a demand curve used for?
It used to show the relationship between quantity demanded (x axis) and price (y axis). A point on the curve shows the quantity of good that would be bought at a given price
Why do demand curves usually slope downwards?
This happens because there is usually more demand when the price is lower. This concept is described in diminishing marginal utility
What is different on the demand curve between increase in quantity demanded and quantity?
An increase in quantity creates a new line and an increase in quantity demanded moves along the existing line
