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Mastering Consumer Economics

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Questions and Answers

Which of the following is the impact of a change in the price of a product on a consumer’s real income and quantity demanded of that good?

Utility

Substitution effect

Total utility

Income effect (correct)

What does the term 'utility' refer to?

The consumer's ability to assign a number to a good representing its degree of utility

The amount of satisfaction derived from consumption of a good (correct)

A fictional unit for utility or satisfaction

The added or extra satisfaction that a consumer realizes from consuming an additional unit of a commodity

What is the difference between cardinal utility and ordinal utility?

Cardinal utility allows the consumer to assign a number representing the degree of utility associated with a good, while ordinal utility only requires ranking the bundles of goods (correct)

Cardinal utility is the added or extra satisfaction that a consumer realizes from consuming an additional unit of a commodity, while ordinal utility is the impact of a change in a product's price on its relative 'value'

Cardinal utility is the amount of satisfaction derived from a bundle of goods, while ordinal utility is the consumer's ability to assign a number to a good representing its degree of utility

Cardinal utility is the impact of a change in a product's price on its relative 'value', while ordinal utility is the amount of satisfaction derived from consumption of a good

What is total utility?

<p>The amount of satisfaction that a consumer gets from consuming some specific quantity of a good</p> Signup and view all the answers

What is marginal utility?

<p>The added or extra satisfaction that a consumer realizes from consuming an additional unit of a commodity</p> Signup and view all the answers

Study Notes

Impact of Price Change on Consumer's Real Income and Quantity Demanded

A change in the price of a product affects a consumer's real income, leading to a change in the quantity demanded of that good.

Utility

Utility refers to the satisfaction or pleasure a consumer derives from consuming a good or service.

Types of Utility

Cardinal Utility: Measures the satisfaction or pleasure a consumer derives from consuming a good or service in quantitative terms, e.g., in units of happiness.
Ordinal Utility: Ranks the satisfaction or pleasure a consumer derives from consuming a good or service in a relative order, e.g., first, second, third, but does not measure the exact quantity.

Total and Marginal Utility

Total Utility: The total satisfaction or pleasure a consumer derives from consuming a certain quantity of a good or service.
Marginal Utility: The additional satisfaction or pleasure a consumer derives from consuming one more unit of a good or service.

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Description

Test your knowledge on demand and consumer behavior with this quiz! Learn about the income effect, substitution effect, and utility, and how they impact a consumer's quantity demanded of a product. Don't miss out on this opportunity to improve your understanding of consumer economics.