Principles of Consumer Utility and Preferences
67 Questions
3 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the definition of utility?

  • The quantity of goods available for consumption
  • The total quantity of goods consumed
  • The value or satisfaction from consumption (correct)
  • The price of goods in the market

    • What does marginal utility (MU) represent?

  • The average utility per unit of a good
  • The utility derived from the first unit of a good
  • The change in utility from consuming one additional unit of a good (correct)
  • The total utility from consuming all units of a good

    • What happens to marginal utility over time?

  • Marginal utility diminishes over time (correct)
  • Marginal utility increases over time
  • Marginal utility fluctuates over time
  • Marginal utility remains constant over time

    • What is an indifference curve?

    <p>A curve showing consumption bundles that give the consumer the same level of satisfaction</p> Signup and view all the answers

    Which property describes the preference order on indifference curves?

    <p>Higher indifference curves are preferred to lower ones</p> Signup and view all the answers

    What does diminishing marginal utility imply about additional units of a good?

    <p>Each additional unit adds less to utility than the previous unit</p> Signup and view all the answers

    In economics, what does 'preference' refer to?

    <p>What consumers want and prioritize among different options</p> Signup and view all the answers

    What is illustrated with indifference curves?

    <p>A consumer’s preference among consumption bundles that give the same level of satisfaction</p> Signup and view all the answers

    What do downward-sloping indifference curves signify?

    <p>As one good increases, the other decreases to maintain constant satisfaction level</p> Signup and view all the answers

    According to indifference curve properties, what happens when two indifference curves intersect?

    <p>It contradicts the principle that higher indifference curves are preferred to lower ones</p> Signup and view all the answers

    What is meant by 'consumption bundles' in economics?

    <p>Combinations of goods and services available for purchase by consumers</p> Signup and view all the answers

    What is the property of indifference curves that represents larger quantities of goods?

    <p>Property 4: Indifference curves are bowed inward (convex to origin)</p> Signup and view all the answers

    What does the slope of an indifference curve represent?

    <p>The rate at which a consumer is willing to trade one good for another</p> Signup and view all the answers

    When does consumer optimum occur?

    <p>At the point where the highest indifference curve and the budget constraint are tangent</p> Signup and view all the answers

    What is always true about the optimal consumption bundle?

    <p>MUA/PA= MUB/PB= …. = MUZ/PZ (subject to budget constraints) for all goods</p> Signup and view all the answers

    What does a change in income do to a budget constraint?

    <p>Causes it to shift to the right (and vice versa)</p> Signup and view all the answers

    What happens when a consumer's valuation of goods equals the market's valuation at their optimum?

    <p>The consumer's valuation of goods equals the market's valuation at their optimum</p> Signup and view all the answers

    What is true about people's willingness to trade away goods based on Property 5?

    <p>People are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little</p> Signup and view all the answers

    What does an indifference curve show?

    <p>Consumption bundles that give the consumer the same level of satisfaction</p> Signup and view all the answers

    What does marginal utility (MU) represent?

    <p>The change in utility from consuming one additional unit of a good</p> Signup and view all the answers

    What happens to marginal utility over time?

    <p>Marginal utility diminishes over time</p> Signup and view all the answers

    What is true about people's willingness to trade away goods based on Property 5?

    <p>People are willing to trade away goods to reach higher indifference curves</p> Signup and view all the answers

    What does the slope of an indifference curve represent?

    <p>The rate at which the consumer is willing to substitute one good for another while maintaining the same level of satisfaction</p> Signup and view all the answers

    What is meant by 'consumption bundles' in economics?

    <p>'Consumption bundles' refer to different combinations of goods and services that a consumer can afford with their income</p> Signup and view all the answers

    What does diminishing marginal utility imply about additional units of a good?

    <p>Each additional unit of a good adds less to utility than the previous unit</p> Signup and view all the answers

    When does consumer optimum occur?

    <p>Consumer optimum occurs when the highest possible indifference curve is tangent to the budget constraint.</p> Signup and view all the answers

    What does a change in income do to a budget constraint?

    <p>A change in income shifts or pivots the budget constraint parallelly.</p> Signup and view all the answers

    What is always true about the optimal consumption bundle?

    <p>It lies on the highest possible indifference curve and within budget constraints.</p> Signup and view all the answers

    What do downward-sloping indifference curves signify?

    <p>They signify that as more of one good is consumed, less of another good must be consumed to maintain constant satisfaction.</p> Signup and view all the answers

    What does an indifference curve illustrate?

    <p>Consumption bundles that give the consumer the same level of satisfaction</p> Signup and view all the answers

    What does the property 'Higher indifference curves are preferred to lower ones' imply?

    <p>Consumers prefer more of a good to less</p> Signup and view all the answers

    What does diminishing marginal utility suggest about additional units of a good?

    <p>Each additional unit adds less to utility than the previous unit</p> Signup and view all the answers

    What does the slope of an indifference curve represent?

    <p>The marginal rate of substitution</p> Signup and view all the answers

    What is always true about the optimal consumption bundle?

    <p>MUA/PA = MUB/PB = ... = MUZ/PZ (subject to budget constraints) for all goods</p> Signup and view all the answers

    What does a change in income do to a budget constraint?

    <p>Shifts the budget constraint</p> Signup and view all the answers

    What does diminishing marginal utility imply about additional units of a good?

    <p>Each additional unit adds less and less extra satisfaction</p> Signup and view all the answers

    What happens when a consumer's valuation of goods equals the market's valuation at their optimum?

    <p>The consumer's optimal choice is reached</p> Signup and view all the answers

    What is meant by 'consumption bundles' in economics?

    <p>'Consumption bundles' refers to different combinations of goods and services that a consumer can afford given their income and prices of goods.</p> Signup and view all the answers

    According to indifference curve properties, what happens when two indifference curves intersect?

    <p>It indicates that both combinations are equally preferred by consumers.</p> Signup and view all the answers

    What does Property 2 state about indifference curves?

    <p>Indifference curves are downward sloping.</p> Signup and view all the answers

    Which property describes the preference order on indifference curves?

    <p>Property 1: higher indifference curves are preferred to lower ones.</p> Signup and view all the answers

    When does consumer optimum occur?

    <p>At the point where the highest indifference curve and the budget constraint are tangent.</p> Signup and view all the answers

    What does Property 4 state about indifference curves?

    <p>Indifference curves are bowed inward (convex to origin).</p> Signup and view all the answers

    What is the term used to describe the change in utility from consuming one additional unit of a good?

    <p>Diminishing marginal utility</p> Signup and view all the answers

    What does an indifference curve illustrate in economics?

    <p>Consumer preference among consumption bundles</p> Signup and view all the answers

    What is true about indifference curves based on their properties?

    <p>Higher indifference curves are preferred to lower ones</p> Signup and view all the answers

    What does the slope of an indifference curve represent?

    <p>The marginal rate of substitution</p> Signup and view all the answers

    What is true about people's willingness to trade away goods based on Property 4?

    <p>More willing to trade away goods they have in abundance</p> Signup and view all the answers

    What does the property 'Higher indifference curves are preferred to lower ones' imply?

    <p>Consumers usually prefer more of something to less of it</p> Signup and view all the answers

    What does a change in income do to a budget constraint?

    <p>Shifts the budget constraint</p> Signup and view all the answers

    What does an indifference curve illustrate in economics?

    <p>Consumer preferences for combinations of goods</p> Signup and view all the answers

    When does consumer optimum occur?

    <p>At the point where the highest indifference curve and the budget constraint are tangent</p> Signup and view all the answers

    What is meant by 'consumption bundles' in economics?

    <p>Combinations of goods that provide a certain level of satisfaction</p> Signup and view all the answers

    What is always true about the optimal consumption bundle?

    <p>MUA/PA = MUB/PB = ... = MUZ/PZ (subject to budget constraints) for all goods</p> Signup and view all the answers

    What happens when a consumer's valuation of goods equals the market's valuation at their optimum?

    <p>The consumer's optimal choice is achieved</p> Signup and view all the answers

    What does diminishing marginal utility imply about additional units of a good?

    <p>Each additional unit provides less extra satisfaction than the previous one</p> Signup and view all the answers

    What does Property 2 state about indifference curves?

    <p>They are negatively sloped</p> Signup and view all the answers

    What does the slope of an indifference curve represent?

    <p>The marginal rate of substitution</p> Signup and view all the answers

    What is the property of indifference curves that represents larger quantities of goods?

    <p>Higher indifference curves are preferred to lower ones</p> Signup and view all the answers

    What happens when a consumer's valuation of goods equals the market's valuation at their optimum?

    <p>The consumer's optimal choice is reached</p> Signup and view all the answers

    What does Property 2 state about indifference curves?

    <p>Indifference curves are downward sloping</p> Signup and view all the answers

    When does consumer optimum occur?

    <p>At the point where the highest indifference curve and budget constraint are tangent</p> Signup and view all the answers

    What does diminishing marginal utility imply about additional units of a good?

    <p>Each additional unit provides less extra satisfaction than the previous one</p> Signup and view all the answers

    What does Property 4 state about indifference curves?

    <p>Indifference curves are bowed inward (convex to origin)</p> Signup and view all the answers

    What does a change in income do to a budget constraint?

    <p>Shifts it parallel to itself</p> Signup and view all the answers

    What is meant by 'consumption bundles' in economics?

    <p>Different combinations of goods that a consumer can afford given income and prices</p> Signup and view all the answers

    What happens to marginal utility over time?

    <p>It decreases as more of a good is consumed</p> Signup and view all the answers

    More Like This

    Consumer Choice Theory Quiz
    5 questions

    Consumer Choice Theory Quiz

    EasierIguana avatar
    EasierIguana
    Theory of Consumer Choice Quiz
    10 questions

    Theory of Consumer Choice Quiz

    FuturisticWormhole avatar
    FuturisticWormhole
    Utilité et consommation économique
    5 questions

    Utilité et consommation économique

    PersonalizedOrphism308 avatar
    PersonalizedOrphism308
    Week 8 (b) : Consumer Theory
    40 questions

    Week 8 (b) : Consumer Theory

    InvincibleAluminium3670 avatar
    InvincibleAluminium3670
    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser