Utility Flashcards
1
Q
What is marginal utility?
A
- The additional satisfaction a consumer gains from consuming one more unit of a good or service
- used by economists to determine how much of a product a consumer will buy
2
Q
What is customer surplus?
A
The difference between the total amount that consumers are willing to pay and the total amount that they actually pay ( market price )
3
Q
What is producer surplus?
A
The difference between the price the producer is willing to supply the product at and the actual amount they receive at market price
4
Q
What is diminishing marginal utility?
A
When the consumer satisfaction starts to decrease
5
Q
How do you calculate the welfare gain to society?
A
Total utility of consumer surplus + total utility of producer surplus
6
Q
Where does the market clear?
A
At equilibrium
7
Q
If a consumer surplus is larger what happens to the welfare of society?
A
Theres a welfare gain to society
