Utility

Question 1

Define utility.

Answer 1

Utility is the amount of satisfaction derived from the consumption of a good or service.

Question 2

Define marginal utility.

Answer 2

Marginal utility (MU) is the addition to total utility (TU) brought about by the extra utility received from the consumption of an extra unit of the good.

Question 3

Define the law of diminishing marginal utility.

Answer 3

The law of diminishing marginal utility states that as more units of a good are consumed, a point will be reached where extra utility begins to decline.

Question 4

Define the consumer.

Answer 4

A consumer is an individual who makes the decision about whether or not to buy a good or a service.

Question 5

Define the law of equi-marginal returns.

Answer 5

The law of equi-marginal returns states consumers purchase quantities of goods until the marginal utilities of them equal each other.