Session 3

Question 1

3 distinct characteristics of consumer behaviour

Answer 1

1. consumer preferences
2. budget constraints
3. comsumer choices

Question 2

market baskets

Answer 2

list specific goods and quantities that consumers and purchases

Question 3

basic assumptions about preferences (4)

Answer 3

1. completeness
   2, transitivity
2. more is better than less
3. diminishing marginal rate of substitution

Question 4

completeness

Answer 4

consumers compare and rank all possible baskets

Question 5

transitivity

Answer 5

if A is preferred to B, and B to C, then A will also be preferred to C

Question 6

diminishing marginal rate of substitution

Answer 6

• decline in MRS when moving along the curve

- the additional satisfaction that a consumer gets from an extra unit will diminish

Question 7

indifference curves

Answer 7

represents all combinations of market baskets that provide a consumer with the same level of satisfaction

Question 8

marginal rate of substitution

Answer 8

the amount of one good that a consumer will give up to obtain more of another

Question 9

utility

Answer 9

represents the satisfaction that a consumer gets from a market basket

Question 10

MRS is maximized at

Answer 10

P(f)/P(c)