SAS11: Consumer Behavior

Question 1

This denotes satisfaction or subjective pleasure derived from consuming a good or service.

Answer 1

Utility

Question 2

It refers to the total amount of satisfaction one obtains from the consumption of goods and services.

Answer 2

Total Utility

Question 3

It is the additional satisfaction derived from the consumption of an additional unit of goods and services.

Answer 3

Marginal Utility

Question 4

What is the formula for Marginal Utility?

Answer 4

MU = △TU / △Q

Question 4

It states that the successive consumption of the same good or service increases the total utility, but at some point the total utility will reach a maximum and beyond this point, the total utility diminishes.

Answer 4

The Law of Diminishing Marginal Utility

Question 5

What are the ways to measure Utility?

Answer 5

Cardinal ranking of preferences & Ordinal ranking of preferences

Question 6

This is when it rank or order an individual’s preferences.

Answer 6

Ordinal ranking of preferences

Question 7

This is when utility is measurable by attaching specific number to each level.

Answer 7

Cardinal ranking of preferences

Question 8

It is a line showing all the combinations of two goods which give a consumer equal utility.

Answer 8

Indifference Curve

Question 9

It is a series of indifference curve.

Answer 9

Indifference Map

Question 10

The higher the curve, the ______ is the level of utility.

Answer 10

higher

Question 11

It shows the combination of goods that can be afforded with your current income.

Answer 11

Budget Line

Question 12

What is the highest satisfaction at a given Budget Line?

Answer 12

Consumer Equilibrium

Question 13

The consumer is at a position of ________ when the budget line is tangent to an indifference curve. This indifference curve is the highest attainable. There is no other curve, because the point of tangency is only at one unique point of the indifference curve.

Answer 13

Equilibrium