Shaia Vincent
AC2103650
C13 Microeconomics
Module 7 Assignment
1. What determines a household’s consumption possibilities? Consumption function, in
economics, the real relationship between consumer spending and the various factors
determining it. At the household or family level, expectations about the level and
riskiness of future income or wealth, interest rates, age, education and family size. The
consumption function is also influenced by the customer’s preferences (e.g. patience or
the willingness to delay gratification), by the consumer’s attitude toward risk, and by
whether the consumer’s wishes to leave a bequest (see legacy). The characteristics of
consumption functions are important for many questions in both macroeconomics and
microeconomics (Editors of encyclopedia, Britannica).
2. How would you answer someone who says that marginal utility theory is useless
because utility cannot be observed? While it’s true that utility as a measure of
satisfaction or happiness derived from consuming a good or service, cannot be directly
observed or measured, this does not render marginal utility theory useless. Marginal
utility theory is a theoretical construct used to explain consumer behavior, and it has
been found to be quite useful in predicting and understanding how consumers make
choices (Jennifer, Studocu.com). scientists have shown that higher levels pf electrical
activity on the brain’s left side are strongly associated with higher levels of satisfaction
(courtesy of Waisman brain imaging lab, University of Wisconsin-Madison).
AC2103650
C13 Microeconomics
Module 7 Assignment
1. What determines a household’s consumption possibilities? Consumption function, in
economics, the real relationship between consumer spending and the various factors
determining it. At the household or family level, expectations about the level and
riskiness of future income or wealth, interest rates, age, education and family size. The
consumption function is also influenced by the customer’s preferences (e.g. patience or
the willingness to delay gratification), by the consumer’s attitude toward risk, and by
whether the consumer’s wishes to leave a bequest (see legacy). The characteristics of
consumption functions are important for many questions in both macroeconomics and
microeconomics (Editors of encyclopedia, Britannica).
2. How would you answer someone who says that marginal utility theory is useless
because utility cannot be observed? While it’s true that utility as a measure of
satisfaction or happiness derived from consuming a good or service, cannot be directly
observed or measured, this does not render marginal utility theory useless. Marginal
utility theory is a theoretical construct used to explain consumer behavior, and it has
been found to be quite useful in predicting and understanding how consumers make
choices (Jennifer, Studocu.com). scientists have shown that higher levels pf electrical
activity on the brain’s left side are strongly associated with higher levels of satisfaction
(courtesy of Waisman brain imaging lab, University of Wisconsin-Madison).
