Theme 1

Question 1

What is the law of diminishing marginal utility?

Answer 1

The more of a product / service that is consumed. The amount of satisfaction gained diminishes.

Question 2

What is marginal utility?

Answer 2

The change in satisfaction from consuming an extra unit

Question 3

What is the total utility?

Answer 3

The total satisfaction from a given level of consumption

Question 4

What is the basic economic problem?

Answer 4

Unlimited needs and wants, limited resources.

Question 5

What is the basic economic problem?

Answer 5

Unlimited needs and wants, limited resources.

Question 6

What are the three economic questions?

Answer 6

What to produce?

How to produce?

For whom to produce?

Question 7

What are the 4 agents that make the market work?

Answer 7

1. Producers (they TRY to maximise profit)
2. Consumers ( they TRY to maximise satisfaction)
3. Governed (they TRY to maximise social welfare
4. Workers (they WANT to maximise benefits of work)

Question 8

The demand curve, what typically happens?

What way does the curve shift?

Answer 8

1. As price falls you tend to buy more (demand increases)
2. the curve shifts right (out)

Question 9

What happens when the price is equal to the equilibrium?

Answer 9

The market is in disequlibrium

Question 10

What happens when the price higher than the equilibrium?

Answer 10

Turns into a surplus