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The Consumer
| Question | Answer |
|---|---|
| What is a consumer? | An individual who makes the decision whether or not to buy goods or services |
| Define utility | The amount of benefit or satisfaction derived from the consumption of a good or service |
| What is an economic good? | A product or service which commands a price derives utility and is transferable |
| What is marginal utility? | The additional utility derived by the consumption of one extra unit of a good |
| What is the law of diminishing marginal utility? | As more units of a good are consumed a point will be reached where marginal utility begins to decline |
| Name 5 assumptions underlying the law of diminishing marginal utility | Applies only after certain amount has been consumed. Sufficient time has not elapsed for circumstances to change. Income doesn't change. It does not apply to addictive goods. |
| Define equilibrium | The condition where there is no tendency to change |
| What is the equimarginal principle of utility? | consumers will choose a combination of goods to maximise their total utility. This will occur where. (Marginal Utility of A) = (Marginal utility of B) |
Created by:
JackEatonK98
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