Consumer Behavior Theory Quiz

What motivates individuals to make choices, according to Jeremy Bentham?

How is utility measured in consumer behavior?

What does marginal utility represent?

If a consumer is willing to pay $3 for a hamburger, what does that indicate?

Why might a consumer pay less for each subsequent unit of a good, like hamburgers?

What happens to the marginal utility as more units of a good are consumed?

At what point should a consumer stop purchasing additional units of a good?

If the price of hamburgers drops to $0.25, how many hamburgers would a consumer buy assuming they are very hungry?

What is total utility when 3 hamburgers are purchased, given the stated marginal utilities?

What occurs when a good or service is consumed until its marginal utility reaches zero?

Why do consumers aim to maximize their utility?

How is the concept of marginal utility essential to the law of supply and demand?

In the case of a free buffet, when should a consumer stop taking food?

Consumer Behavior Theory

Sellers may charge outrageous prices based on perceived consumer value.
Consumers have the freedom to choose whether or not to pay those prices.
Consumers buy goods and services because they derive utility or value from them.
Utility is quantified by how much consumers are willing to pay.

Utility

Utility is not the same as usefulness.
Utility means only that a customer finds an item desirable enough to purchase.
Example: A person is hungry enough to pay $3 for a hamburger even if it's the only one available.

Marginal Utility

Marginal utility is the additional satisfaction a consumer receives from consuming one more unit of a good or service.
As consumption increases, the marginal utility typically diminishes.

Law of Marginal Utility

As consumers consume increasing amounts of a good or service, the satisfaction derived from each additional unit diminishes.

Total Utility

Total utility is the overall satisfaction a consumer receives from consuming a certain number of units of a good or service.

Maximizing Utility

People try to maximize utility by spending their limited income on goods and services that offer the most satisfaction.
Consumers will consume to a point where the marginal utility of the good or service equals its price( MU = Price).

Utility Curve

The utility curve demonstrates how satisfaction (TU) changes as consumption (MU) increases.
- Phase I. A rising curve where utility increases with consumption
- Phase II. A leveling off curve where marginal utility and thus, total utility, are maximized
- Phase III. A declining curve where both total and marginal utility decrease with consumption

Summary of Consumer Utility

Utility isn't inherent; it's determined by the buyer's willingness to pay.
Individual utility functions (how much one values something) can change over time.
There's no single, universally accepted answer for the utility of a specific item.

Test your understanding of consumer behavior theory, focusing on concepts such as utility and marginal utility. This quiz covers key principles that explain how consumers derive value from goods and services. Explore how perceived value influences pricing and consumption choices.