Role of Consumers

Question 1

What is a rational consumer?

Answer 1

Someone who makes decisions based on scarcity. Weighs costs and benefits.

Question 2

What is scarcity?

Answer 2

There are limited resources and unlimited wants. Everyone has to make choices.

Question 3

What is utility?

Answer 3

The satisfaction receieved from consuming a product or service.

Question 4

What is the cost and benefit analysis?

Answer 4

If the benefit is more then the cost, a rational consumer will purchase. If the cost is more then the benefit, a rational consumer will not purchase.

Question 5

What is utility maximisation?

Answer 5

Achieving a higher amount of satisfaction.

Question 6

What is consumer surplus?

Answer 6

Consumer surplus is when a consumer expects to pay more for a good or service, but ends up paying less, resulting in a surplus of money. For example, if a consumer expects to pay $200 for a nail appointment, but the price ended up being 100$, the consumer would have a surplus of $100.

Question 7

What is producer surplus?

Answer 7

Producer surplus is when a producer sells a good or service at a higher price then what they expect it to be worth in the market. For example, if broccoli is worth $10 in the market, the producer could make the price $15.