Consumer MCQ 2
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Questions and Answers

What is the role of consumers in the economy?

  • Consumers demand goods and services and firms supply them. (correct)
  • Consumers supply goods and services and firms demand them.
  • Consumers pay direct taxes to the government.
  • Consumers indicate to suppliers what they don't want.

    • What is one of the results of demand for goods and services?

  • Profits for entrepreneurs (correct)
  • Unemployment
  • Reduced consumer spending
  • Decreased national income

    • What is the goal of the Equi-Marginal Principle of consumer behaviour?

  • To allocate limited income equally among all goods
  • To minimize utility
  • To allocate limited income so that the ratio of marginal utility to price is equal for all goods (correct)
  • To maximize profits

    • What happens when consumer sentiment is positive?

    <p>Consumers are optimistic and save less, contributing to economic growth</p> Signup and view all the answers

    What is an indirect tax paid by consumers?

    <p>VAT</p> Signup and view all the answers

    What happens when consumer sentiment is negative?

    <p>Consumers are pessimistic and demand decreases, contributing to economic downturn</p> Signup and view all the answers

    What do consumers indicate to suppliers through their actions?

    <p>What they want and don't want</p> Signup and view all the answers

    What is a consequence of consumer spending making up a significant portion of national income?

    <p>Increased tax revenue for the government</p> Signup and view all the answers

    According to the Equi-Marginal Principle, how do consumers allocate their limited income?

    <p>So that the ratio of marginal utility to price is equal for all goods</p> Signup and view all the answers

    What is a characteristic of positive consumer sentiment?

    <p>Optimism about the future</p> Signup and view all the answers

    What is a consequence of decreased demand resulting from negative consumer sentiment?

    <p>Contribution to economic downturn</p> Signup and view all the answers

    What type of tax do consumers pay indirectly?

    <p>VAT</p> Signup and view all the answers

    Study Notes

    Role of the Consumer

    • Consumers create demand for goods and services, which firms supply to meet their needs.
    • Consumers communicate their preferences to suppliers, indicating what they want and don't want.
    • Consumers pay indirect taxes, such as Value-Added Tax (VAT), to the government.

    Impact of Consumer Demand

    • Demand for goods and services leads to employment opportunities.
    • It generates profits for entrepreneurs who supply the goods and services.
    • Suppliers pay taxes to the government as a result of consumer demand.
    • Consumer spending makes up a significant portion of national income.

    Equi-Marginal Principle

    • The Equi-Marginal Principle of consumer behavior states that consumers maximize utility by allocating their limited income.
    • The principle is based on the idea that consumers will spend their income in a way that equalizes the ratio of marginal utility to price for all goods and services they consume.

    Consumer Sentiment

    • Consumer sentiment is a measure of the economy's health based on consumer opinions.
    • Positive consumer sentiment:
      • Indicates optimism about the future.
      • Leads to increased demand for goods and services.
      • Reduces savings rates.
      • Contributes to economic growth.
    • Negative consumer sentiment:
      • Indicates pessimism about the future.
      • Leads to decreased demand for goods and services.
      • Increases savings rates.
      • Contributes to economic downturn.

    Role of the Consumer

    • Consumers create demand for goods and services, which firms supply to meet their needs.
    • Consumers communicate their preferences to suppliers, indicating what they want and don't want.
    • Consumers pay indirect taxes, such as Value-Added Tax (VAT), to the government.

    Impact of Consumer Demand

    • Demand for goods and services leads to employment opportunities.
    • It generates profits for entrepreneurs who supply the goods and services.
    • Suppliers pay taxes to the government as a result of consumer demand.
    • Consumer spending makes up a significant portion of national income.

    Equi-Marginal Principle

    • The Equi-Marginal Principle of consumer behavior states that consumers maximize utility by allocating their limited income.
    • The principle is based on the idea that consumers will spend their income in a way that equalizes the ratio of marginal utility to price for all goods and services they consume.

    Consumer Sentiment

    • Consumer sentiment is a measure of the economy's health based on consumer opinions.
    • Positive consumer sentiment:
      • Indicates optimism about the future.
      • Leads to increased demand for goods and services.
      • Reduces savings rates.
      • Contributes to economic growth.
    • Negative consumer sentiment:
      • Indicates pessimism about the future.
      • Leads to decreased demand for goods and services.
      • Increases savings rates.
      • Contributes to economic downturn.

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    Description

    Quiz on the role of consumers in economics, including their demands, taxes, and effect on employment and profits. Also covers the Equi-Marginal Principle of consumer behavior.

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