Student number: 15081884
Word count: 1043
MICROECONOMICS 2
COURSEWORK (20%)
Consumer utility and behavior are slightly different from each other beginning with the term consumer utility, this term was created by economists to describe the satisfaction or the usefulness a consumer acquires or obtains after using a good or service (Boundless, 2016) If a consumer continues to consume said good or product the level of satisfaction they get from that product starts to reduce or diminish which is known as diminishing marginal utility. It can be said that a consumer makes decisions based on the utility gained based on one option or the other, consumer behavior on the other hand is a phrase much used in economics and it can be explained as a series of steps or decisions a consumer goes through when they decide to either choose, purchase, use or dispose products and services and satisfy human wants
There are several types of welfare measurement to analyze policies like compensation variation (CV), equivalent variation (EV) and consumer surplus
Compensation variation can be defined …show more content…
This scenario has to do with the green party leader convincing the government to impose the green tax on air travel and also wanting to compensate individuals for this policy the best welfare measurement for this scenario would be compensation variation, going on what compensation variation means, the government is trying return consumer or individuals to their initial level of utility what this implies is the tax that has been imposed on consumers has caused an increase in the price of air travel which could cause a decrease in demand for air travel and an increase in demand for other forms of transportation such as cars, ships etc however the government has agreed to compensate the consumers which returns the consumers to their initial point of utility which they used to enjoy , the government has already started imposing green tax on air travel in the us and also in the European union
Word count: 1043
MICROECONOMICS 2
COURSEWORK (20%)
Consumer utility and behavior are slightly different from each other beginning with the term consumer utility, this term was created by economists to describe the satisfaction or the usefulness a consumer acquires or obtains after using a good or service (Boundless, 2016) If a consumer continues to consume said good or product the level of satisfaction they get from that product starts to reduce or diminish which is known as diminishing marginal utility. It can be said that a consumer makes decisions based on the utility gained based on one option or the other, consumer behavior on the other hand is a phrase much used in economics and it can be explained as a series of steps or decisions a consumer goes through when they decide to either choose, purchase, use or dispose products and services and satisfy human wants
There are several types of welfare measurement to analyze policies like compensation variation (CV), equivalent variation (EV) and consumer surplus
Compensation variation can be defined …show more content…
This scenario has to do with the green party leader convincing the government to impose the green tax on air travel and also wanting to compensate individuals for this policy the best welfare measurement for this scenario would be compensation variation, going on what compensation variation means, the government is trying return consumer or individuals to their initial level of utility what this implies is the tax that has been imposed on consumers has caused an increase in the price of air travel which could cause a decrease in demand for air travel and an increase in demand for other forms of transportation such as cars, ships etc however the government has agreed to compensate the consumers which returns the consumers to their initial point of utility which they used to enjoy , the government has already started imposing green tax on air travel in the us and also in the European union