Is the satisfaction or pleasure one gets from consuming it.
The ability of a good or service to satisfy wants is called:
the law of diminishing marginal utility states that:
B. beyond some point additional units of a product will yield less and less extra satisfaction to a consumer.
if the price of product x rises, then the resulting decline in the amount purchased will:
B. increase the marginal utility of this good.
The change in total utility obtained by consuming one additional unit of a good or service.
total utility may be determined by:
B. summing the marginal utilities of each unit consumed.
The law of diminishing marginal utility explains why:
demand curves slope downward.
the theory of consumer behavior assumes that:
A. consumers behave rationally, maximizing their satisfactions.
To maximize utility a consumer should allocate money income so that the:
marginal utility obtained from the last dollar spent on each product is the same.
4 units of J and 5 units of K.
A consumer is maximizing her utility with a particular money income when:
MUa/Pa = MUb/Pb = MUc/Pc = ... = MUn/Pn.
When a consumer shifts purchases from product X to product Y the marginal utility of:
X rises and the marginal utility of Y falls.
What do the income effect, the substitution effect, and diminishing marginal utility have in common?
They all help explain the downsloping demand curve.
A consumer's demand curve for a product is downsloping because:
marginal utility diminishes as more of a product is consumed.
1 units of X and 2 units of Y.
Why do people tend to eat more at all-you-can-eat buffet restaurants than at restaurants where each item is purchased separately?
Once the all-you-can-eat meal is purchased, consumers view additional trips back to the buffet as having a price of zero.
According to economists, gift registries, returning gifts for cash refunds, and "recycling gifts":
increase the efficiency of gift-giving because they allow the recipient to consume goods that provide greater utility and transfer away those goods that are less satisfying.
According to the prospect theory, firms are more likely to shrink packages than raise prices because:
Consumers feel the loss of a price increase more than they feel the loss of buying a smaller package for their money.
Suppose that Dairy Barn Foods produces a regular sour cream with 10 grams of fat per serving, and a "low fat" sour cream with only 5 grams of fat per serving (assume that this is still considered a lot of fat to consume per serving). According to prospect theory, how should Dairy Barn promote its "low fat" sour cream?
It should advertise that the "low fat" sour cream has only "half the fat" of the regular sour cream.
According to the "endowment effect:"
people assign higher values to things they own than things they don't.
Kara was earning $40,000 per year. When her income rose to $60,000 per year, she enjoyed the higher level of consumption for a while, but eventually she was no more happy than when she earned $40,000 (assume prices didn't change over this time period). Economist Richard Easterlin described this as:
the hedonic treadmill.
Last Word) "Nudges" refer to:
subtle changes in policies or practices that result in large behavioral changes.
The budget line shows:
all possible combinations of two goods that can be purchased, given money income and the prices of the goods.
price of C is $4 and the price of D is $2.
not be affected.
An indifference map implies that:
curves farther from the origin yield higher levels of total utility.
purchase more of Y and less of X.
MRS = Px/Py.
points 1, 2, and 5 yield equal amounts of utility.
3 implies a higher level of utility than does 1 or 5.
consumer will purchase more of J and less of K.
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