EKN 110 - CHAPTER 3: CONSUMER
BEHAVIOUR AND UTILITY
MAXIMIZATION CORRECT 100%
Utility - ANSWERThe want-satisfying power of a good or service; the satisfaction or
pleasure a consumer obtains from the consumption of a good or service (or from the
consumption of a collection of goods and services).
cardinal utility - ANSWERA form of utility measurement where utility is measurable in
numerical values.
budget line - ANSWERA line that shows the different combinations of two products a
consumer can purchase with a specific money income, given the products' prices.
indifference curve - ANSWERA curve showing the different combinations of two
products that yield the same satisfaction or utility to a consumer.
marginal rate of substitution (MRS) - ANSWERThe rate at which a consumer is
willing to substitute one good for another (from a given combination of goods) and
remain equally satisfied (have the same total utility); equal to the slope of a
consumer's indifference curve at each point on the curve.
ordinal utility - ANSWERA form of utility measurement where consumers' satisfaction
is not quantifiable but the level of satisfaction is based on comparisons in
consumptions expressed in indifference curves.
total utility - ANSWERThe total amount of satisfaction derived from the consumption
of a single product or a combination of products.
marginal utility - ANSWERThe extra utility a consumer obtains from the consumption
of one additional unit of a good or service; equal to the change in total utility divided
by the change in the quantity consumed.
law of diminishing marginal utility - ANSWERThe principle that, as a consumer
increases the consumption of a good or service, the marginal utility obtained from
each additional unit of the good or service decreases.
rational behaviour - ANSWERHuman behaviour based on comparison of marginal
costs and marginal benefits; behaviour designed to maximize total utility.
BEHAVIOUR AND UTILITY
MAXIMIZATION CORRECT 100%
Utility - ANSWERThe want-satisfying power of a good or service; the satisfaction or
pleasure a consumer obtains from the consumption of a good or service (or from the
consumption of a collection of goods and services).
cardinal utility - ANSWERA form of utility measurement where utility is measurable in
numerical values.
budget line - ANSWERA line that shows the different combinations of two products a
consumer can purchase with a specific money income, given the products' prices.
indifference curve - ANSWERA curve showing the different combinations of two
products that yield the same satisfaction or utility to a consumer.
marginal rate of substitution (MRS) - ANSWERThe rate at which a consumer is
willing to substitute one good for another (from a given combination of goods) and
remain equally satisfied (have the same total utility); equal to the slope of a
consumer's indifference curve at each point on the curve.
ordinal utility - ANSWERA form of utility measurement where consumers' satisfaction
is not quantifiable but the level of satisfaction is based on comparisons in
consumptions expressed in indifference curves.
total utility - ANSWERThe total amount of satisfaction derived from the consumption
of a single product or a combination of products.
marginal utility - ANSWERThe extra utility a consumer obtains from the consumption
of one additional unit of a good or service; equal to the change in total utility divided
by the change in the quantity consumed.
law of diminishing marginal utility - ANSWERThe principle that, as a consumer
increases the consumption of a good or service, the marginal utility obtained from
each additional unit of the good or service decreases.
rational behaviour - ANSWERHuman behaviour based on comparison of marginal
costs and marginal benefits; behaviour designed to maximize total utility.
