The Consumer MCQ 1

What is the primary assumption underlying the concept of opportunity cost in consumer behaviour?

What is the definition of a rational consumer?

What is the characteristic of an economic good?

What is the law that states that as a consumer consumes more of a good or service, the additional utility derived from each additional unit will decrease?

What is the primary goal of a rational consumer?

Under which condition does the Law of Diminishing Marginal Utility not apply?

What is assumed to remain constant in the Law of Diminishing Marginal Utility?

What happens to the marginal utility as a consumer consumes more units of a good?

When does the Law of Diminishing Marginal Utility take into account the time factor?

What is the consequence of the Law of Diminishing Marginal Utility?

Assumptions Underlying Consumer Behaviour

Consumers face a fundamental problem: unlimited wants vs limited incomes, leading to the need for choice and decision-making.
Opportunity cost is a direct consequence of making choices: every decision to buy one product means giving up another.

Rational Consumer

A rational consumer is characterized by reasonable and logical thinking in purchasing decisions, rather than emotional influences.
Rational consumers aim to maximize utility when making purchasing decisions, as dictated by economic theory.

Economic Goods

Economic goods possess three key characteristics:
- They provide utility or satisfaction to the consumer.
- They are relatively scarce, which is why they command a price.
- They are transferable from one person to another.

Law of Diminishing Marginal Utility

Consumers are subject to the Law of Diminishing Marginal Utility, which states that the additional satisfaction derived from consuming one more unit of a product decreases as consumption increases.

Law of Diminishing Marginal Utility

The law states that as a consumer consumes more units of a good, the extra satisfaction/marginal utility derived from each additional unit will eventually decline.

Assumptions of the Law

The law does not apply to addictive or medical goods.
The law assumes that no time has passed between the consumption of each unit.
The law assumes that the consumer's income has not changed during the consumption of the good.

This quiz covers the fundamental assumptions underlying consumer behaviour, including limited incomes, unlimited wants, and rational decision-making. It tests your understanding of how consumers make purchasing decisions and the principles that guide their behaviour.