ECON 1050 Chapter Notes - Chapter 8: Marginal Utility, Utility, Economic Surplus

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erindinosaur628

16 Apr 2016

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Explain the limits to consumpion and describe preferences using the concept of uility. A household"s components choices are determined by its consumpion possibiliies and preferences. Households" preferences can be described by a uility schedule that lists the total uility and marginal uility derived from various quaniies of goods and services consumed. The principle of diminishing marginal uility is that the marginal uility from a good or service decreases as consumpion of the good or service increases. Explain the marginal uility theory of consumer choice. A consumers objecive is to maximize total uility. Total uility is maximized when all available income is spent and when the marginal uility per dollar from all goods is equal. If marginal uility per dollar for good a exceeds that for good b, total uility increases if the quanity purchased of good a increases and the quanity of good b decreases.

Related Questions

The principle of diminishing marginal utility:

A refers to the tendency of total utility to increase until an individual's budget is no longer constrained.

B refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases.

C indicates that if a good is inferior, less of it will be purchased when income falls during a period.

D assumes all goods are normal.

goldchimpanzee38

11) For a consumer to maximize utility from a given income, A) the marginal utility from each good must be maximized. B) the total utility from each good must be maximized. C) the marginal utilities of all goods and services consumed must be equal. D) the marginal utility per dollar from all goods and services consumed must be equal E) the amount of each good consumed per dollar must be equal.

budget line

marginal utility

complete property of preferences

market demand

consumption bundle

substitution effect

Giffen good

total effect

income effect

transitive property of preferences

indifference curves

utility

the marginal rate of substitution

utility function

1.	_____	The satisfaction or benefit that consumers receive from consuming goods or services.
2.	________________ _	A particular combination of specific quantities of goods or services
3.	________________ _	Consumers can rank all conceivable bundles of goods or services
4.	_____	If A is preferred to B, and B is preferred to C, then A is always preferred to C.
5.	_____	Equation showing a consumerâs perception of the total utility forthcoming from consuming each bundle of goods and services.
6.	_____	A set of consumption bundles each and every one of which provides a consumer with exactly the same level of total utility.
7.	_____	The number of units of Y that must be given up for total utility to remain the same when one more unit of X is consumed.
8.	_____	The addition to total utility attributable to consuming one more unit of a good, holding the consumption of all other goods constant.
9.	_____	The line showing all bundles of goods that can be purchased at given prices if the entire income is spent.
10.	_____	The change in the consumption of a good that would result if the consumer remained on the original indifference curve after the price of the good changes.
11.	_____	The change in consumption of goods results strictly from the change in purchasing power after the price of a good changes.
12.	________________ _	The sum of the substitution and income effects.
13.	_____	A good for which quantity demanded varies directly with price, causing an upward sloping demand curve.
14.	_____	A list of prices and the corresponding quantity consumers are willing and able to purchase at each price.

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ECON 1050 Chapter Notes - Chapter 8: Marginal Utility, Utility, Economic Surplus

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