ECN 101 Chapter Notes - Chapter 7: Status Quo Bias, Prospect Theory, Status Quo

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As a consumer increases consumption of a good or service, the. A change in the price of a product changes a consumer"s real income (purchasing. A firm will purchase more of an input whose relative price has declined and use less. The total amount of satisfaction derived from the consumption of a single product or a. The extra utility a consumer obtains from the consumption of one additional unit of a. Human behaviour based on comparison of marginal costs and marginal benefits; The limit that a consumer"s income (and the prices that must be paid for goods and. To obtain the greatest utility, the consumer should allocate money income so. The combination of goods purchased that maximizes total utility by applying the law of diminishing marginal utility: marginal utility obtained from each additional unit of the good or service decreases. Rational behaviour : behaviour designed to maximize total utility.

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