Utilitarianism Flashcards
What is the main principle of Utilitarianism?
Each person acts to maximise their own happiness or utility
Utilitarianism emphasizes individual actions aimed at maximizing happiness.
Define Wealth in the context of economics.
The total market value of an individual’s assets at a given moment in time
Assets include property, investments, etc.
What does ‘market value’ refer to?
The amount people would be willing to pay for assets
Market value is crucial in determining an individual’s wealth.
How is Income defined in economic terms?
Measures how wealth changes over time, usually over a month or a year
Income reflects the flow of wealth rather than its total stock.
What is a Feasible Set?
Different combinations of goods and services that individuals can potentially buy on their total wealth
This concept illustrates the choices available to consumers.
What are the two main components of Utilitarianism in economics?
- Value theory
- Theory of right action
Value theory focuses on individual happiness; theory of right action emphasizes maximizing happiness.
What does the Value theory in Utilitarianism focus on?
Individual happiness as the ultimate goal for individuals
Money is seen as a means to achieve this happiness.
What is the Theory of right action in Utilitarianism?
People should act to maximise their happiness
This theory guides ethical decision-making.
How does John Stuart Mill interpret individual freedom?
Each person is free to act as they wish to maximise their happiness, as long as they don’t harm others
This interpretation highlights the balance between freedom and ethical responsibility.
What does the Pareto Criterion state?
Any change that causes harm to others cannot ethically be made
This criterion is used to assess the fairness of economic decisions.
What is Constrained Optimisation?
Determining the highest level of happiness (utility) someone can achieve given their limited resources
It involves resource allocation to maximize satisfaction.
What is the focus of Mental Accounting according to Richard Thaler?
How individuals categorize and evaluate economic outcomes based on their budgets
Mental accounting affects consumer behavior and decision-making.
Fill in the blank: In Mental Accounting, Sam’s budget is _______.
£300
This budget illustrates how mental accounting functions in real-life scenarios.
What are the prices of coffee and avocado in Sam’s example?
- Price of coffee (Pc) = £3 per cup
- Price of avocado (Pa) = £1 each
These prices impact Sam’s budgeting decisions.
What does the budget constraint formula represent?
B ≥ Pc x Qc + Pa x Qa
This formula shows how Sam must allocate his budget between coffee and avocados.
