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The Consumer
The consumer
| Question | Answer |
|---|---|
| What is a consumer? | An individual who makes the decision whether to buy goods or services |
| What is utility? | It is the amount of benefit or satisfaction a consumer gets from consuming a good or service |
| What are the assumptions of consumer behavior? | 1.It is assumed consumers have limited incomes 2.It is assumed that consumers obey the equi-marginal principle 3.It is assumed that consumers will act rationally 4.it is assumed that consumers are subject to the law of diminishing marginal utility |
| What is an economic good? | A product or service which commands a price (must be scarce in relation to demand) ,derives utility (must provide satisfaction) and is transferable (ownership or benefit must be capable of being given from one person to another) |
| What is marginal utility? | the extra utility a consumer gets from consuming an extra unit of the good |
| What is the law of diminishing marginal utility? | States that as more units of a good are consumed , a point will be reached where marginal utility begins to decline |
| What are the assumptions of the law of diminishing marginal utility? | 1.It applies only after a certain minimum has been consumed 2. Sufficient time has not passed for things to change 3.It assumes income doesn't change 4.it does not apply to addictive goods/medicines |
| What is the equi-marginal principle? | It explains the behavior of a consumer in distributing their limited income among various goods and services (MUx/Px=MUy/Py) |
Created by:
brianmanesis
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